Economy

Costlier food, diesel drive inflation higher in June

Our Bureau New Delhi | Updated on November 12, 2017

A women look at pulses prices in Mumbai. (file photo)

Headline inflation surged in June on account of rising prices of food, diesel and minerals, fuelling expectations that the RBI will be forced to announce another round of interest rate hikes later this month.

The annual Wholesale Price Index rose 9.44 per cent in June, higher than the 9.06 per cent year-on-year growth recorded in May, according to data released by the Ministry of Commerce and Industry here.

Adding to the worries, the Government sharply raised April's inflation reading by over a percentage point to 9.74 per cent from the provisional estimate of 8.66 per cent. The consistent upward revisions effected in the final readings for much of the earlier data has led to worries that inflation could have already have entered the double digits.

Analysts said the fuel price hikes announced in June are yet to seep into the broader economy and that inflation is likely to stay around the double digits until November-December, by when the fuel impact is expected to play out.

Weekly inflation data, released separately on Thursday, showed that food inflation quickened to a three-week high of 8.31 per cent during the week ended July 2, up from the previous week's annual rise of 7.61 per cent.

The Union Finance Minister, Mr Pranab Mukherjee, said inflation figures reported for June “continues to be matter of concern” and asserted that the Government was “monitoring the price situation closely”. He attributed the increase in WPI inflation to a hike in “administered fuel prices, seasonal effects, an upward movement in mineral and manufactured prices” and, in part, reflecting imported inflation.

Expressing concern over the rising trend, Mr Mukherjee said both the Government and the RBI “are working in tandem to bring it down to a comfortable level”.

Analysts said in view of the latest data, the RBI is likely to continue with its anti-inflationary measures and hike interest rates by another 25 points at its quarterly review on July 26. The central bank has hiked interest rates 10 times since March 2010 to check inflation.

The monthly data for June showed that food items stabilised at 8.38 per cent in June against 8.37 per cent in the previous month. The index for fuel and power segment, which has a weight of almost 15 per cent in the WPI basket, surged 12.85 per cent year-on-year in June, up from 12.32 per cent in the previous month.

LPG gained 12.17 per cent on an annual basis, while high speed diesel rose 6.58 per cent. Petrol, where prices were hiked in April, surged 30.61 per cent year-on-year. Manufactured products, which have a weight of around 65 per cent in the WPI basket, increased by 7.43 per cent year-on-year in June.

Published on July 14, 2011

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