New Delhi, Aug 14 (IANS) The fall in India’s wholesale inflation will boost domestic demand despite global economic uncertainties, industry body PHDCCI said on Thursday.

The provisional annual inflation rate based on the Wholesale Price Index (WPI) eased to (-) 0.58 per cent in July compared to the same month previous year, led by a sharp drop in the prices of food articles and crude petroleum.

PHDCCI President Hemant Jain said that food prices have been consistently softening since February, with inflation in the segment sliding from 3.43 per cent in February to (-) 6.29 per cent in July.

“This will boost domestic demand, despite the volatile international landscape,” he added.

Crude petroleum prices also declined significantly, from a 12.31 per cent increase in June to a fall of (-) 14.86 per cent in July.

He added that the moderation in food prices, coupled with a favourable monsoon, will support agricultural activity and help accelerate economic growth.

According to government data, the WPI inflation in July marked a two-year low, down from (-) 0.13 per cent in June.

The decline was largely driven by a 2.15 per cent fall in the food index and a 2.43 per cent drop in fuel prices.

This is expected to trickle down to the retail level, easing consumer inflation and lowering transport costs.

Rahul Agrawal, Senior Economist at ICRA Ltd, noted that the year-on-year WPI deflation widened to 0.6 per cent in July from 0.1 per cent in June, in line with expectations.

The food segment saw a sharper contraction, particularly in vegetables, pulses, and animal products.

However, he cautioned that the WPI may return to positive territory in August due to rising food and crude oil prices, rupee depreciation, and an unfavourable base.

Heavy rains could also push up perishable prices in the latter half of August, he added.

ICRA expects WPI inflation to average around 1 per cent in FY26, with CPI inflation in the range of 3.0-3.2 per cent.

This, Agrawal said, would likely limit nominal GDP growth to around 8 per cent in the fiscal year, compared to 9.8 per cent in FY25.

–IANS

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