The FINANCIAL — India’s wholesale price index fell for the ninth-straight month in July, dragged down by lower global commodity prices and weak demand and bolstering the case for rate cuts by the central bank to help strengthen the economy, according to Nasdaq.
The index fell 4.05% from a year earlier, much more than the 2.40% decline in June, government data showed on August 14. The fall also exceeded the 2.6% decline predicted by economists polled by The Wall Street Journal.
Prices fell across the board, with fuel and vegetables leading declines. Fuel prices were down 12.81% from a year earlier in July, after a 10.03% decline the month before, largely due to the steep fall in global crude oil prices over the past year. Vegetable prices fell 24.5% while prices of manufactured products, which have about 65% weight in the index, also fell 1.47% year-over-year, indicating weak demand that could weigh on an economic recovery.
Pulses as well as protein-rich foods such as milk, eggs and meat were among the few items that were costlier. Prices of pulses rose 35.75% from a year earlier in July, as unseasonal rainfall earlier in February and March damaged crops, hurting supplies.
The data mirror the consumer-price figures released Wednesday, which also showed a sharper-than-expected fall in the benchmark inflation rate to an eight-month low of 3.78% in July.
While the decline in wholesale prices was broadly anticipated in the wake of high comparative readings last year, the accelerating fall over the past couple of months is starting to raise concerns that demand in the economy still is weak and needs policy support to revive.
“Admittedly, the WPI rate of inflation is becoming less important for India’s policymakers, as the CPI rate includes a wider range of goods and services and is easier for international comparisons,” said Shilan Shah, India economist at research firm Capital Economics. “Nevertheless, the fact that WPI inflation has plummeted again is unlikely to be disregarded.”