Retail inflation at 4-month high, WPI might rise in June

Retail inflation rises close to double digits in June

After reaching a 15-month low in May, consumer price index (CPI)-based inflation touched a four-month high of 9.9 per cent in June, official data released on Friday showed.  

The retail price inflation, measured by CPI, drew close to double digits after falling for third month in May to 9.31 per cent as rains disrupted supply of food items and fuels turned costlier.

Retail inflation touched double digits at 10.1 per cent in urban areas in June compared to 9.6 per cent in the previous month. Inflation in rural areas  increased to 9.6 per cent from nine per cent.

“It is certainly higher than the expected level and a cause of worry. What is more worrying is the wholesale price index (WPI) would go up, if not this month, then certainly in the next month. Low growth and high inflation is not a pleasant situation and would create a dilemma for policy makers,” said D K Joshi, chief economist, CRISIL.  

Inflation picked up due to  expensive food items (including beverages), which were at a three-month high of 11.8 per cent in June, compared to 10.7 per cent in May. Cereals were the worst-affected as the inflation rate was at 17.6 per cent, much higher than 16.3 per cent in May. This was accompanied by the sharpest rise in the prices of vegetables which rose 14.6 per cent in June, compared to 9.8 per cent in the previous month.

According to a latest Assocham survey, the prices of vegetables have gone up 250-300 per cent during the last three years.

“Vegetables prices keep moving up and come down equally sharply. These are highly perishable items and slight decline in supply leads to an immediate pick-up in prices,” added Joshi.

The prices of eggs, fish and meat rose by 12.7 per cent in June, compared to 12.5 per cent in the previous month. Inflation for non-alcoholic beverages rose to 10.9 per cent from 10.5 per cent in May this year. Retail fuel inflation was up at 8.6 per cent in June from 8.1 per cent in the previous month as petrol and diesel prices were raised.

Economists believe high vegetable prices and rupee depreciation would lead to a high WPI-inflation for June, which is set to be released on Monday. “We expect a pickup in wholesale inflation to 5.1 per cent in June from 4.7 per cent in the previous month.

Adverse weather conditions led to supply disruptions and rising prices of perishable food items in some regions.

The petrol and diesel price hike in June along with the depreciating rupee would cause WPI inflation to rise,” noted Aditi Nayar, senior economist, Icra.