Inflation in wholesale prices moderated marginally from the record 15.88% pace in May to 15.18% in June, as a minor paring in the price rise of manufactured products, fuel and power as well as primary articles was offset by a surge in food price inflation to 12.41% from 10.89% in May.
June’s wholesale inflation rate is the lowest in three months as the Commerce and Industry Ministry revised April’s Wholesale Price Index (WPI) to reflect a 15.38% price rise that month as opposed to 15.08% estimated earlier. This is the 15th successive month that wholesale price inflation is over the 10% mark in India.
Despite the reduction in the headline rate, there was no change in the overall WPI index on a month-on-month basis. The Ministry said the high inflation in June was primarily driven by a rise in prices of mineral oils, food articles, crude petroleum & natural gas, basic metals, chemicals & chemical products, food products etc. as compared to a year ago.
LPG price rise
With June being the first full month after the excise duty cuts on fuel products in late May, fuel and power inflation dropped a tad from 40.6% in May to 40.4%. While diesel inflation eased to a four-month low of 54.9% in June from 65.2% in May, LPG price rise accelerated to 53.2% from 47.7% in May. Petrol price inflation moderated a little from May’s 58.8% to 57.8% in June.
Inflation in food articles moved up to the highest level in several months to 14.4% from 12.3% in May, driven largely by a sharp surge in inflation for potatoes (39.4%), vegetables (56.75%) and fruits (20.33%). Inflation in cereals remained virtually unchanged at 8% in June, while wheat price rise eased marginally from 10.55% in May to 10.34%. Inflation in manufactured products dropped below 10% after four months, to hit 9.2%.
Aditi Nayar, chief economist at rating firm ICRA, attributed the overall easing in inflation to the sharp corrections in the inflation for minerals and basic metals and non-food articles, amid fears of an impending global recession unfolded which have hit commodity prices.
“The good news is that the core inflation index (that excludes food and energy prices) declined by 0.7% in month-on-month terms after rising 24 months in a row, and dampened the year-on-year core inflation to single digits at 9.3% after a gap of 13 months,” she said.
‘Further drop likely’
ICRA expects wholesale inflation to drop further to about 13% in July, reflecting the ongoing correction in global commodity and fuel prices as well as domestic food prices. India’s retail inflation had also eased slightly to a three-month low of 7.01% in June from 7.8% in April, as per data released by the National Statistical Office on Tuesday.
“We continue to foresee 60 basis points of rate hikes by the Monetary Policy Committee over the next two reviews, taking the repo rate to 5.5% by September, followed by a pause to ascertain the momentum of economic growth,” Ms. Nayar projected. One basis point equals 0.01%.