New Delhi: India's wholesale inflation, measured by the Wholesale Price Index (WPI), dropped to a three-month low of 2.04% in July, down from a 16-month high of 3.36% in June, largely due to a significant decrease in food prices.

Food inflation fell to 3.45% during the month, compared to 10.87% in June.

Data from the Ministry of Commerce and Industry on Wednesday revealed a slight year-on-year (YoY) increase in inflation for other key sub-indices such as manufactured products and fuel and power.

Within food articles, factory gate price pressure eased significantly, with notable drops in vegetable prices (-8.93%) and egg, meat, and fish prices (-1.59%). Prices for onions (88.77%), cereals (8.96%), paddy (10.98%), and pulses (20.27%) also saw minor dips.

However, potato prices surged by 76.23%, and fruit prices rose by 15.62%. Inflation in manufactured products, which hold a 64.2% weight in the index, increased to 1.58% in July from 1.43% in June, driven by higher prices for manufactured beverages (2.14%), tobacco (2.31%), textiles (2.09%), wood products (3.53%), and pharmaceuticals (2.05%).

Fuel and power inflation accelerated to 1.72% in July, with a sharp rise in cooking gas prices (6.06%), though high-speed diesel (-1.65%) and petrol (-0.64%) remained in contraction but showed signs of increase.

This decline in wholesale inflation follows a high base effect and a decrease in food prices, which had earlier pushed retail inflation to a near five-year low of 3.54% in July.

Although the Reserve Bank of India (RBI) focuses on retail inflation for monetary policy, the drop in WPI could help keep retail inflation low over time.