Wholesale inflation rises to a 16-month high in June on higher food prices
- Food inflation climbed to 10.87% from 9.82% a month ago.
- While cereals, wheat, paddy, onions, vegetables and fruits got costlier, the prices of pulses, eggs, meat, fish and milk saw a decline in June.
India's wholesale inflation surged to a 16-month high of 3.36% in June, driven by rising prices of food, manufactured products and primary articles, according to data released by the Union commerce ministry on Monday.
The Wholesale Price Index (WPI), a proxy for producers' prices, has been in the positive territory since November 2023. It stood at -4.18% a year ago. Wholesale inflation had been in negative territory between April and October 2023.
A Reuters poll had forecast a rise of 3.5% in June against May's 2.61%.
Food inflation was a major contributor, climbing to 10.87% from 9.82% a month ago. While cereals, wheat, paddy, onions, vegetables and fruits got costlier, the prices of pulses, eggs, meat, fish and milk saw a decline in June.
Non-food articles, too, saw price decline of 1.95% in June, less than 3.99% decline in May.
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However, fuel and power prices rose 1.03%, compared to 1.35% last month. Crude petroleum and natural gas prices accelerated 12.55% in June, compared to 9.8% in May.
Manufactured product prices rose by 1.43% in June, compared to 0.78% in May.
Further rise expected
“We expectWPIinflation to witness a moderate rise in the near term on the back of a further increase in inflation of manufactured goods. Fuel and power inflation is also set to show a rising trend. However, these upside pressures may get partly mitigated by a likely moderation in food inflation," said Suman Chowdhury, chief economist and head of research at Acuité Ratings & Research.
"The pressures onWPIinflation can adversely impact Consumer Price Index (CPI)-based inflation, which is expected to moderate in Q2FY25 on the back of a favourable base. While the Reserve Bank of India (RBI) has projected headline inflation at 3.8% in the second quarter, we believe upside risks to that forecast remain without a significant moderation in food inflation," Chowdhury added.
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Retail inflation
Retail inflation rose to 5.08%year-on-year in June, statistics ministry data showed, after having dropped to a 12-month low of 4.75% in May. The rise in June was due to higher food inflation, which accounts for nearly 40% of the consumer price basket.
CPI-based inflation has remained below 5% since March and below the 6% mark since September, staying within the central bank’s tolerance range of 2-6% for 10 consecutive months.
In June, RBI kept the policy repo rate unchanged at 6.5%, signalling that interest rate cuts may be delayed. The RBI's monetary policy committee maintained its rate pause, seeking durable signs of easing inflation amid volatile food prices.
Also Read: Rural-urban inflation gap: Can this puzzle be solved?
Interest rates are a crucial tool in the central bank's arsenal for controlling inflation. Higher interest rates make borrowing more expensive, which can reduce demand and consumer spending by limiting the supply of money in the market.
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Business NewsEconomyWholesale inflation rises to a 16-month high in June on higher food prices
First Published:15 Jul 2024, 03:32 PM IST
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