WPI rises sharply in June to 1.62%

Push from food inflation, among others

Pushed up by food prices such as vegetables and fruits, Wholesale Price Index (WPI)-based inflation rose to 1.62 per cent in June, which was double the rate recorded (0.79 per cent) in each of the previous two months.

With retail inflation also inching up to a 22-month high of 5.77 per cent from 5.76 per cent, the Reserve Bank of India (RBI) may be prompted to maintain status quo on the policy rate in its monetary review next month.

Official data released on Thursday showed the WPI index had cumulatively risen 3.82 per cent in FY17 for the months leading up to June. Compared with this, the rise was 1.70 per cent for the corresponding period in FY16.

After rising for the first time in April after 17 straight months of contraction, wholesale inflation has consistently been pushed up by food inflation, which has steadily risen since February. It rose 8.18 per cent in June after a 7.88-per cent rise in May. Food inflation, the biggest component of the Consumer Price Index-based inflation, had also been responsible for retail inflation rising 7.38 per cent in June, against 7.20 per cent in May.

Among food items, potato held its position as the highest-rising item, up 64.41 per cent in June from 60.01 per cent in May. Potato prices had turned inflationary in March, rising 6.55 per cent after many months of decline. Tomato prices had also risen exponentially, according to reports, but figures were not available.

On the other hand, price rise for pulses, continued to mellow, with the item going up 26.61 per cent after a rise of 35.56 per cent in May. Although systematically providing the largest inflationary push among food articles for long, pulses prices had continuously dropped since last November.

Vegetables continued to become dearer, as inflation rose to 16.91 per cent in June, from 12.94 per cent in May. Again, the rate of price rise in vegetables stood at 2.90 per cent in April, seeing a decline in prices in the first three months of this calendar year.

“Although monsoon is expected to be above normal this year but some delay in it reaching many parts of country delayed the sowing of kharif crop.” Sunil Kumar Sinha, principal economist at India Ratings, said. This might have resulted in the escalation of cereal prices like rice and wheat, which rose 3.77 per cent and 6.42 per cent, respectively, in June, he added.

Prices of manufactured products, which make up nearly 65 per cent of the index, continued to inch up for the fourth straight month, rising 1.17 per cent in June. It had risen 0.91 per cent in the previous month.  Manufactured food products, which include sugar and edible oils, registered a significant rise of 8.35 per cent from 7.54 per cent last month. This was mainly due to sugar prices, which rose 26.09 per cent as against 22.30 per cent in the previous month, on the back of production shortages.

Processed food prices also pushed up manufacturing inflation to 1.17 per cent in June from 0.91 per cent in the previous month. Inflation in sugar rose to 26.09 per cent from 22.30 per cent.

Prices for fuel and power continued to remain depressed but fell at a slower pace in June at 3.62 per cent, compared with 6.14 per cent in May. Components like liquefied petroleum gas and diesel fell on global cues, although at a slower rate. However, diesel saw an uptick in June, rising 1.13 per cent after many months of consecutive fall.