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Wholesale inflation cools a bit in June

Food articles inflation for both primary and processed categories hardened further in June, remaining in double digits for the second straight month. Wholesale food price index, which contributes nearly 25% of the WPI index, climbed 12.41% in June from 10.89% in May

Vegetable inflation rose marginally to 56.75% in June from 56.36% in May, while that in case of fruits shot up to 20.33% during the month from 9.98% in May. (Photo: Reuters)Premium
Vegetable inflation rose marginally to 56.75% in June from 56.36% in May, while that in case of fruits shot up to 20.33% during the month from 9.98% in May. (Photo: Reuters)

BENGALURU: India's wholesale inflation eased marginally to a three-month low in June, as non-food and fuel prices showed signs of easing. However, inflation print remained above the 15% mark for the third month in a row. With global prices for commodities and fuel starting to come down, economists expect domestic prices to cool further in the coming months.

Wholesale Price Index (WPI)-based inflation eased to 15.18% in June from 15.88% in the previous month, as per data released by the ministry of commerce and industry on Thursday. It was the fifteenth straight month of double-digit WPI inflation growth.

Food articles inflation for both primary and processed categories hardened further in June, remaining in double digits for the second straight month. Wholesale food price index, which contributes nearly 25% of the WPI index, climbed 12.41% in June from 10.89% in May.

Meanwhile, core inflation eased to single digit at 9.3% in June after a gap of 13 months.

“With the spike in the US inflation, expectations of aggressive monetary tightening by the US Fed are likely to drive further global slowdown fears, dampening commodity prices. In the Indian context, this should translate into lower WPI inflation faster, with a relatively slower transmission to retail inflation," said Aditi Nayar, chief economist, Icra. Nayar expects WPI inflation to ease to 13% in July 2022, “reflecting the ongoing correction in global commodity and fuel prices as well as domestic food prices."

Brent crude oil prices eased to $99.3 per barrel on Thursday amid expectations of a rate hike by the Fed Reserve with the US inflation hitting a four-decade high of 9.1% in June.

Back home, primary articles inflation eased marginally to 19.22% in June from 19.71% in May. Under the head, food articles saw inflation rise to 14.39% during the month compared to 12.34% in May.

Economists expect the Reserve Bank of India's rate setting panel to continue raising policy rates. The central bank has raised key rates by 90 basis points over the last two months.

“We continue to foresee 60 bps of rate hikes by the MPC over the next two reviews, taking the repo rate to 5.5% by September 2022, followed by a pause to ascertain the momentum of economic growth," said Nayar.

Vegetable inflation rose marginally to 56.75% in June from 56.36% in May, while that in case of fruits shot up to 20.33% during the month from 9.98% in May.

Fuel and power inflation inched lower to 40.38% in June from 40.62% in the previous month. Crude petroleum inflation eased to 72.98% in June from 78.67% a month ago. Inflation for diesel softened to 54.93% in June from 65.23% in the previous month and that for petrol eased to 57.82% from 58.78% last month.

The Union government in May last week announced several measures to cool inflation, including a sharp cut in central excise duty on petrol by 8 per litre and on diesel by 6 per litre, costing the exchequer close to 1 trillion per year in revenues. The Centre also imposed export tariffs on petrol, diesel, and Air turbine fuel besides windfall taxes on crude production to improve domestic supplies to ease inflation and cut the need for imports and lower import bill.

India’s retail inflation, measured by the consumer price index, stayed largely unchanged at a high of 7.01% in June as against 7.04% in May, data released by the national statistical official showed on Tuesday.

ABOUT THE AUTHOR
Dilasha Seth
" Dilasha Seth is a journalist reporting on macroeconomic policy for the last 11 years. She writes extensively on issues including international trade, macroeconomic data, fiscal policy, and taxation. At Mint, she reports on trade deals that India is signing besides key policy decisions of the Ministry of Finance. She closely tracked and covered the transition to the goods and services tax (GST) regime in 2017 and also writes on direct tax-related issues. In the past, she has worked with Business Standard and The Economic Times. She is based in Bangalore."
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Updated: 15 Jul 2022, 01:01 AM IST
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