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Producers’ inflation-based Wholesale Price Index (WPI) slipped to little over 12 per cent in June, as against 12.94 per cent in May.
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CPI down on cheaper food items; industrial growth up mainly on base effectThe trend is similar to retail inflation based on the Consumer Price Index (CPI), which declined to 6.26 per cent in June as against 6.30 per cent in May. Though both are still high, experts feel that the numbers will continue to decline further. Accordingly, the dilemma for the RBI Governor-led Monetary Policy Committee on rate revision will wane.
A statement issued by the Commerce & Industry Ministry said the annual rate of inflation was 12.07 per cent for June as compared to (–) 1.81 per cent in June last year. “The high rate of inflation in June 2021 is primarily due to low base effect and a rise in prices of mineral oils viz. petrol, diesel (HSD), naphtha, ATF, furnace oil, etc, and manufactured products such as basic metals, food products and chemical products as compared to the corresponding month of the previous year,” it said.
The inflation for primary food articles eased to 3.1 per cent in June from 4.3 per cent in May, despite a worrying 18.5 per cent month-on-month rise in the vegetable index, partly reflecting the heavy rains in the early part of the month. The headline WPI inflation is expected to continue to soften, while remaining in double-digits in the July-September quarter of the current fiscal.
According to Aditi Nayar, Chief Economist with ICRA, while core inflation hardened further to 10.4 per cent in June from 10 per cent in May, the pace of the month-on-month uptick in this index eased to a four-month low of 0.5 per cent. “We expect the YoY (Year-on-Year) core inflation to record a further modest uptick in July, before commencing a gradual downtrend from August,” she said. Further, she 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.
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