Inflation down by 6.87 percent

India’s headline inflation fell to 6.87 percent in July from 7.25 percent in the previous month, putting pressure on the Reserve Bank of India to cut interest rates to revive growth.

The monthly inflation, based on wholesale price index (WPI), was 9.36 percent during the corresponding month of the previous year.

Government data released Tuesday showed food inflation declined to 10.06 per cent in July from 10.81 per cent in June as prices of vegetables, pulses, milk, eggs, meat and fish eased during the month under review.

Potato prices zoomed by 72.96 percent. Prices of vegetables in July surged by 24.11 percent year-on-year.

Food articles have a 14.3 per cent share in the WPI basket.

Food inflation had re-entered the double-digit zone after a gap of six months in April, 2012 and the trend continued till June.

Pulses became costlier by 28.26 percent. Milk became costlier by 8.01 percent. Prices of eggs, meat and fish rose by 16.00 percent.

Prices of manufactured products increased by 5.58 percent year-on-year. The inflation of manufactured products stood at 5.00 percent in June, while price of fuel and power grew by 5.98 percent, while it was 10.27 percent in June. Petrol prices went up by 8.64 percent, it was 13.11 percent in June.

However, petrol as an item has lower weightage in the WPI of about 1.09 basis points and does not primary impact the headline inflation.

Diesel on the other hand has a higher weightage in the WPI of about 50-75 basis points due to larger usage in the transportation sector. High-speed diesel prices did not change and remained at the same price point year-on-year went up by 6.81 percent.

Recent factory data showed that India continued to face the problem of high inflationary pressure and a slow rate of growth.

Data released by the Central Statistics Office recently, India’s industrial output fell by 1.8 percent in June led by sharp contraction in manufacturing production. Output grew by 2.4 percent in May, led by rebound in manufacturing and electricity production.

The cumulative growth in the factory output in April-June period, measured in terms of the Index of Industrial Production (IIP), stood at 0.1 percent from 0.8 percent recorded in May year-on-year. The IIP had declined by 3.5 percent in industrial production in March, the first such contraction in factory output since October 2011, when it shrank by 4.7 percent.