Wholesale prices fall 2.4% in June

This is the ninth straight month of wholesale deflation

Wholesale Price Index-based inflation (WPI) for the month of June continued to be in the deflationary territory for the eighth straight month, backed primarily by lower commodity prices.

But a big rise in prices of essential food items like pulses, potato, and onion pointed to concerns of possible higher food inflation.

Provisional WPI inflation for June stood at -2.40%, compared with -2.36% in May and 5.66% for the same period last year. 

Build up inflation rate in the financial year 2015-16 so far was 1.42% compared to a build up rate of 1.50% in the corresponding period of the previous year, government data showed on Tuesday.

The WPI data comes a day after Consumer Price Index (CPI)-based inflation rose to a nine-month high of 5.40% in June, on the back of spike in food prices.

In Tuesday's WPI data, prices of pulses grew 33.67% in June year-on-year, compared with 22.84% in May, and 15.38% in April. Potato showed a rise of 52.40%, and onions showed a rise of nearly 19% year-on-year for June. Unseasonal rainfall in March and April, which led to crop damage, is likely to be one of the reasons for these trends.

The rise in food prices validates the Reserve Bank of India's stance on food inflation. RBI governor Raghuram Rajan has warned that he will not cut rates further if food prices increase further. 

Economists say that the government will have to step up its measures to control food inflation by improving its storage and distribution networks, and by cutting down on leakages.

Rajan has cut rates thrice this calender year, each time by 0.25 basis points, while at the same time resisting calls by monetary policy hawks for deeper rate cuts.

Highlights:

Fuel, power group inflation at -10.03% vs -10.51% (m-o-m)

Primary articles inflation at -0.76% Vs -0.77% (m-o-m)

Manufactured products inflation at -0.77% Vs -0.64% (m-o-m)

Food articles inflation at 2.88% Vs 3.8% (m-o-m)