India's wholesale price index increased by 1.88 percent on the year in June, up from an eleven-month low of 0.9 percent in June and the first increase after three months of sharp declines. The index rose 1.09 percent on the month in July after falling 0.09 percent in June.
The rebound in WPI inflation in July was mainly driven by prices for food articles, around 15 percent of the index. These rose by 6.19 percent on the month and by 2.15 percent on the year in July after an increase of 0.94 percent on the month and a decline of 3.47 percent on the year in June. In contrast, year-on-year growth in fuel and power prices (around 13 percent of the total), slowed from 5.28 percent to 4.37 percent. Inflation for manufactured products (around 64 percent of the total index) was also slightly weaker, falling from 2.27 percent in June to 2.18 percent in July.
Consumer price index data are scheduled for release later today. Both WPI and CPI inflation have dropped sharply in recent months, with the latter falling to just 1.54 percent in June, the lowest level in the series' history and below the RBI's target range of 2.0 percent to 6.0 percent. Officials argue, however, that it has been difficult to distinguish the extent to which this decline in headline inflation was driven by transitory or structural factors. They note that base effects and a potential seasonal spike in food prices could push headline inflation back up again in coming months, a view that appears to be supported by the increase in WPI inflation in July.