The wholesale price index (WPI) inflation cooled to a three-month low of 2.04 per cent in July, government data showed on Wednesday, as a decline in food prices, particularly vegetables, helped ease price pressures.

However, economists said the data has to seen with cautious optimism. While the headline figure suggests a cooling of price pressures, a closer examination reveals that this moderation is primarily a statistical artifact rather than a reflection of substantive economic improvement.

The moderation follows four consecutive months of increases, with inflation hitting 3.36 per cent in June. In July 2023, WPI was at negative 1.23 per cent. Food inflation in July eased to 3.45 per cent from a scorching 10.87 per cent in June, primarily due to a month-on-month decline in prices of vegetables, cereals, pulses, and onions. Vegetables, in particular, saw a deflation of 8.93 per cent in July, compared with a 38.76 per cent inflation in June.

“The positive rate of inflation in July 2024 is due to increases in prices of food articles, manufactured food products, mineral oils, crude petroleum and natural gas, and other manufacturing,” the commerce ministry said.

Inflation in the manufactured products group rose to 1.58 per cent in July from 1.43 per cent in June, while fuel and power inflation climbed to 1.72 per cent from 1.03 per cent.