Economists polled by Reuters had estimated the wholesale price index for July would fall 2.70%. It fell 4.12% in June.

In July, fuel and power prices fell 12.79% from a year earlier, compared with a fall of 12.63% in June, and prices of primary articles rose 7.57% versus a fall of 2.87%.

Food prices sharply rose 7.75% year-on-year, compared with a fall of 1.24% in June, and manufactured product prices fell 2.51% in July, against a 2.71% fall the previous month.

Inflation in Asia's third-largest economy has started to accelerate after showing signs of easing in the first few months of the year.

According to a Reuters poll of economists, India's retail inflation is likely to accelerate to 6.40% in July on surging food prices, breaching the upper end of the Reserve Bank of India's (RBI) 2%-6% tolerance band for the first time in five months.

The data will be released later in the day.

Last week, the RBI held its key lending rate steady as expected but moved to reduce the amount of cash in banking system as inflation concerns resurfaced following higher-than-usual seasonal spikes in food prices.

"Despite a favourable statistical base, the deflation of WPI has rapidly declined in July 2023 on account of a sharp sequential pick up in food prices, especially vegetable prices," said Rupa Rege Nitsure, group chief economist at L&T Finance. That vindicates the RBI's move to extend the "pause" and watch the situation carefully, she added.