India’s wholesale price inflation slowed to a 3-month low of 2.04 per cent in July compared to the same month last year, mainly due to a decline in vegetable prices, according to figures released by the Commerce Ministry on Wednesday. 

The wholesale price index had risen by 3.36 per cent in June.

Food prices rose 3.55 per cent in July compared with an increase of 8.68 per cent in June. Vegetable prices came down by as much as 8.93 per cent in July compared to a sharp increase of 38.76 per cent in June as the scorching heat wave in the northern states hit production.

The prices of manufactured products rose 1.58 per cent in July which was a tad higher than the 1.43 per cent increase in the previous month. Fuel and power prices rose 1.72 per cent compared to a 1.03 per cent increase in June.

India’s consumer price inflation has come down to 3.54 per cent in July this year compared to the same month of the previous year to fall below the RBI’s medium-term target of 4 per cent for the first time in close to five years, data released by the Ministry of Statistics on Monday showed.

Food inflation, which accounts for nearly half of the overall consumer price basket eased to 5.06 per cent in July as compared to 8.36 per cent in June.

The RBI has fixed a mid-term target of 4 per cent for retail inflation before it goes in for a cut in interest rates to rev up growth. The RBI does not take into account WPI inflation in formulating its monetary policy. However, an easing in wholesale price inflation also leads to a decline in retail inflation.

The RBI kept the key policy repo rate unchanged at 6.5 per cent for a ninth consecutive meeting on Thursday as it continues to maintain a balance between accelerating economic growth and keeping inflation under control.

RBI Governor Shaktikanta Das said the Monetary Policy Committee has decided by a 4:2 majority to keep the repo rate unchanged as inflation has risen above 5 per cent and is still above the targeted level of 4 per cent.

He said that inflation after having eased to 4.8 per cent in April and May has risen to 5.1 per cent in June on the back of “stubbornly” high food prices.

“Without price stability, growth cannot be sustained so we have decided to continue with the disinflationary stance,” Das explained.

However, the RBI Governor said that the country’s inflation rate is expected to come down in the third quarter of the current financial year.