India: Inflation rises in July due to weak rupee
August 14, 2013
In July, the wholesale price index (WPI) - India's preferred inflation measure - jumped 1.56% over the previous month. This represents the highest monthly increase in over two years. The reading was well above the 0.64% increase observed in June and reflects higher costs for primary products - particularly for food - as well as for fuel, which were pushed by the sharp weakening of the rupee.
As a result of the monthly jump, wholesale prices increased 5.8% in July over the same month last year (June: 4.9% year-on-year), which represents the highest reading since February. The increase beat market expectations that had wholesale inflation rising to 5.0%. Despite the annual increase, annual average WPI inflation declined from 6.7% in June to 6.5% in July.
Meanwhile, also in July, the consumer price index increased 1.29% over the previous month, below the 1.70% rise observed in June. As a result of the milder monthly increase, annual inflation moderated from 9.9% in June to 9.6% in July.
FocusEconomics Consensus Forecast panellists expects wholesale price inflation to average 5.4% in fiscal year 2013/2014, which is down 0.3 percentage points from last month's forecast. In fiscal year 2014/2015, the panel expects wholesale price inflation to average 5.7%.
Author: Ricardo Aceves, Senior Economist