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Even as consumer inflation is up, producers’ inflation has came down. The producers’ inflation, which ia also known as factory inflation and is represented by the rate of wholesale price index (WPI), came down to little over 2 per cent in the month of June.
According to a statement released by Ministry of Commerce and Industry, the annual rate of inflation, based on monthly WPI, stood at 2.02 per cent for the month of June 2019 (over June 2018) as compared to 2.45 per cent for the previous month and 5.68 per cent during the corresponding month of the previous year.
Read also: Is WPI useful in India anymore?
The build-up inflation rate in the financial year so far was 1.33 per cent, compared to a build-up rate of 2.41 per cent in the corresponding period of the previous year.
Another rate cut?
A lower WPI means companies are getting lower price for their products and services. This will affect not just profitability of the corporate sector but also investment plan. The Government is already concerned with rate of investment which has come down to below 30 per cent of Gross Domestic Product (GDP).
These signs could prompt the Monetary Policy Committee (MPC) led by RBI Governor to cut rates in forthcoming monetary policy review, which is scheduled to take place next month.
While the rate of WPI rose for primary articles (food articles such as fruit and vegetables, non-food articles like groundnut seed, safflower floriculture, raw jute, linseed, industrial wood and sunflower, minerals), it came down for fuel and power, but it was constant for manufactured products.
Last week, the Government released data for rate of retail inflation based on Consumer Price Index (CPI). It recorded 3.18 per cent in June, as against 3.05 per cent in May. According to the report, urban areas faced a higher inflation with CPI rate at 4.33 per cent. Food inflation too hardened in urban areas with over 5.5 per cent.
However, since the overall rate is still below targeted median rate of 4 per cent, it is making a strong case for fourth successive policy rate cut.
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