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July WPI inflation dips, but industry expresses concern over high food inflation
WPI inflation dipped to a five months low of 5.19 per cent in July, helped by a moderation in fuel costs. But the soaring prices for vegetables and fruits are likely to fuel it again. Poor rains in some parts of the country has pressured food prices and vegetable prices, for example, are up 68 per cent since March.
The WPI inflation data was revised upwards for May to 6.18 per cent, from 6.01 per cent as per provisional estimates. The Reserve Bank in its monetary policy review last week had cautioned that continued uncertainty over monsoon could stoke food inflation, but expressed the hope that government policies will improve supplies in the coming months.

Reacting to the dip in WPI inflation Sidhartha Birla, President, FICCI said that food inflation is still a concern.

"While risks on account of monsoon and volatility in crude oil prices have receded for the time being, some degree of ambiguity remains. Inflation continues to be a concern as prices of food articles are still elevated. Also, the retail inflation data released earlier this week had inched up once again at the back of high food prices."

He added, "Amidst the current situation, it is amply clear that Reserve Bank will maintain a watchful stance going ahead. However, we hope that due focus will be given on the implementation of measures announced by the government to tame food prices. Also, it needs to be assured that the industrial growth is not stifled and recent momentum seen in IIP numbers is kept pace with."

Director General of apex industry body CII, Chandrajit Banerjee said it was good to note that headline inflation has eased to a two month low in July 2014 essentially on the back of a drop in fuel prices and a moderation in the prices of food items such as cereals and vegetables.

He also added, "It is anticipated that food inflation would come down in the coming months considering that monsoons have started picking up pace and the rain deficiency has come down significantly. Besides, the recent initiatives taken by the government to contain inflation would act as a lever to tackle inflation and curb inflationary expectations, going forward."

Rana Kapoor, President of ASSOCHAM spoke about the problems to be tackled. "Prices of primary and food articles remain a worrying area about inflation -both at WPI and CPI level. Deficient rainfall, coupled with inherent weaknesses in supply management, need to be addressed."

He also said, "Another area of concern is a vast difference between WPI and CPI which is close to three percentage points. It also reflects the operational inefficiencies in the supply chain. The good part is that the global fuel prices are receding which should help in the coming weeks and months."

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