India’s Falling Wholesale Prices Signal Muted Inflation Pressure
Vendors wearing protective masks prepare and display garlands at the Ghazipur Wholesale Flower Market in New Delhi, India. (Photographer: Prashanth Vishwanathan/Bloomberg)

India’s Falling Wholesale Prices Signal Muted Inflation Pressure

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India’s wholesale prices fell for a third straight month, signaling muted price pressures in the economy despite retail inflation edging up.

Data from the Commerce Ministry showed the wholesale price index declined 1.8% last month from a year earlier. That was slower than a 2.4% drop estimated by economists surveyed by Bloomberg.

The price print comes a day after data showed consumer prices rose 6.09% in June. While retail inflation is above the upper end of the Reserve Bank of India’s 2%-6% target band, it’s unlikely to keep the central bank from further cutting interest rates to support an economy headed for its first annual contraction in more than four decades.

“The monetary policy committee should not be overly concerned with the CPI inflation trend at this stage,” said Kaushik Das, chief India economist at Deutsche Bank AG in Mumbai. “Non-food manufactured goods inflation, a proxy for core WPI inflation was at -1.3% y-o-y in May, which highlights the deflationary scenario persisting in the manufacturing sector.”

The RBI’s rate-setting panel, which has delivered 115 basis points of easing so far this year, is due to review monetary policy in the first week of August.

The increase in consumer prices was mostly led by a supply-shock in core inflation, Deutsche Bank’s Das said, adding that it will reverse over the coming months, given continuation of weak demand.

©2020 Bloomberg L.P.

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