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WPI Inflation comes in higher for the month of July

“The Wholesale Price Index (WPI) inflation for the month of July 2017 came in at 1.88%. This marks a sharp increase from the 0.90% WPI inflation reported in the month of June 2017. However, the cumulative WPI inflation for the first 4 months of 2017, at 0.62%, is sharply lower than the 3.81% reported in the corresponding period last year.
Within the WPI basket, primary articles consisting of crops and minerals saw inflation at 4.3%. However, fuel and power inflation was in negative territory. The manufactured products basket, which has a weightage of 64.23%, was almost flat at 0.2% and that ensured that the overall WPI inflation did not spike too much.
This shift in WPI inflation upwards is a good signal as it means that weak growth is not putting pressure on the wholesale inflation. If WPI remains in negative territory for too long (as in 2015-16) it could be the lead indicator of an economic slowdown. Indian economy appears to have skipped that syndrome, at least for now. Also vegetable inflation has moved up sharply and the monthly print hereon is important monitoring factor from an rbi perspective in order to determine the future rate course trajectory.”

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