Wholesale price inflation decreased slightly but still over 12 percent

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Producers’ inflation-based wholesale price index (WPI) fell to just over 12 percent in June from 12.94 percent in May.

The trend is similar to consumer price index (CPI) retail inflation, which fell to 6.26 percent in June, down from 6.30 percent in May. While both are still high, experts believe the numbers will continue to decline. Accordingly, the dilemma for the monetary policy committee led by the governors of the RBI will subside in the interest rate revision.

According to a statement from the Ministry of Commerce and Industry, the annual inflation rate was 12.07 percent in June compared to (-) 1.81 percent in June last year. “The high rate of inflation in June 2021 is primarily due to a low base effect and an increase in petroleum prices. Gasoline, diesel (HSD), naphtha, ATF, blast furnace oil, etc. and processed products such as base metals, food and chemical products compared to the corresponding month last year, ”it said.

Staple food inflation declined from 4.3 percent in May to 3.1 percent in June, despite a worrying 18.5 percent increase in the vegetable index from the previous month, partly due to heavy rains earlier in the month. WPI headline inflation is expected to continue to ease while remaining in double digits in the July-September quarter of the current budget.

According to Aditi Nayar, chief economist at ICRA, core inflation hardened from 10 percent in May to 10.4 percent in June, but the pace of the monthly increase in that index declined to a four-month low of 0.5 percent. “We expect core year-on-year inflation to see another modest spike in July before starting a gradual downward trend from August,” she said. In addition, she said that while persistent double-digit WPI inflation and its possible future impact on CPI inflation are not a key driver, they will worry the tone of monetary policy.


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