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India’s wholesale price inflation eased in June to 12.07% from a record 12.94% a month ago as food and fuel prices fell while those of manufactured items accelerated.

Data released by the industry department showed food inflation in June decelerated to 3.1% from 4.3% a month ago while fuel inflation eased to 32.8% from 37.6% despite the recent increase in prices of petrol, diesel and cooking gas.

Manufactured products saw a marginal increase in inflation to 10.9% from 10.8% in May due to rising price pressure in textiles, apparel, leather, wood, chemicals, pharmaceuticals, cement, basic metals and fabricated metal products.

Core inflation excluding food and fuel items hardened further to 10.4% in June from 10% a month ago.

The wholesale price index (WPI) data will provide a breather to both the government and the central bank after consumer price index (CPI) data released on Monday also showed retail inflation marginally eased to 6.26% in June while remaining above the upper limit of the central bank’s inflation target for the second straight month.

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Sarvesh Kumar Sharma/Mint


Gaura Sengupta, India economist at IDFC First Bank said WPI inflation tends to reflect global inflation pressures more fully as it gives a higher weight to fuel and other commodities while CPI gives a higher weight to food and services, both of which are driven more by domestic dynamics.

“Hence, inflation pressures were first visible in WPI (since March 2021), while upward pressure on CPI became more visible from May 2021 onwards. The elevated WPI inflation implies that cost push pressures will gradually seep into CPI inflation as capacity utilization improves," she added.

The Reserve Bank of India’s (RBI) monetary policy committee (MPC) aims to achieve a retail inflation target of 4%, plus or minus 2%. Even though elevated inflation will put pressure on RBI, it is expected to maintain policy rates unchanged at the next monetary policy review in August to protect the nascent economic recovery from the devastating impact of the pandemic.

Aditi Nayar, chief economist at ICRA Ratings said while not a central driver, the continuing double-digit WPI inflation and its potential future spillovers into the CPI inflation will inject uneasiness into the tone of monetary policy.

“With the CPI inflation likely to have peaked, we expect policy normalization to commence in Q4 FY22, after the growth revival solidifies. However, the change in stance to neutral may be advanced to the December 2021 policy review, if inflation springs a negative surprise," she added.

On the escalating inflationary situation, the finance ministry last week said the localized restrictions due to the second wave of the pandemic could have led to some supply-side disruptions, contributing to price pressures.

“With the encouraging progress of the southwest monsoon, supply-side interventions in the pulses and edible oils market, and gradual unlocking of states with declining caseload would mitigate cost pressures going forward. However, rising global commodity prices, especially of crude and logistics costs, pose upside risks to the inflation outlook," it added.

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