India’s WPI inflation for June drops to 12.07% as food and crude oil prices fall

A worker unloads crates of tomatoes from a truck at a vegetable store in Coonoor, Tamil Nadu | Representative image | Dhiraj Singh | Bloomberg file photo

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New Delhi: Inflation based on wholesale prices eased slightly to 12.07% in June, as crude oil and food products experienced some weakening in prices.

However, WPI inflation remained in double digits for the third consecutive month in June, mainly due to a weak base last year. WPI inflation was (-) 1.81% in June 2020.

In May 2021, inflation hit a record high of 12.94%.

Experts said WPI’s continued double-digit inflation and its potential future fallout on retail price inflation could inject unease into the tone of monetary policy and noted that WPI is expected to remain at a high level. until October 2021.

After five consecutive months of increases, inflation based on the Wholesale Price Index (WPI) in June eased as food and crude oil prices retreated, although manufactures declined. are hardened.

“The annual inflation rate is 12.07% for the month of June 2021 (compared to June 2020) compared to () 1.81% in June 2020.

“The high inflation rate in June 2021 is mainly due to the weak base effect and the rising prices of mineral oils namely gasoline, diesel (HSD), naphtha, ATF, fuel oil, etc. ., and manufactured goods like base metals, foodstuffs, chemicals, etc., compared to the corresponding month of the previous year, ”said the Ministry of Commerce and Industry.

Inflation in the fuel and electricity basket eased to 32.83 percent in June, from 37.61 percent in May. Food inflation also eased to 3.09% in June, from 4.31% in May, even as onion prices soared.

In manufactured products, inflation stood at 10.88% in June, against 10.83% the previous month.

The Reserve Bank of India, in its monetary policy last month, kept interest rates unchanged at record highs and pledged to maintain an accommodative policy to support growth.

Retail price inflation has remained above the RBI’s 6 percent comfort level for two consecutive months at 6.26 percent in June, according to data released earlier this week.

CIFAR Chief Economist Aditi Nayar said WPI headline inflation is expected to continue to moderate while remaining in double digits in the September quarter.

“With CPI inflation likely to have peaked, we expect policy normalization to begin in the fourth quarter of fiscal 2022, after the recovery in growth consolidates,” Nayar said.

The president of the industrial chamber PHDCCI, Sanjay Aggarwal, said that the significantly high inflation of fuel and electricity increases the input costs of the industry and its competitiveness in national and international markets.

“At this point, we urge the government to consider petroleum products under the GST to rationalize prices and contain rising inflation,” Aggarwal added.

Senior Indian Ratings and Research Economist Sunil Kumar Sinha said that inflation firming despite weak demand needs some clarification.

“It seems that much of the rise in inflation can be attributed to imported inflation. While global commodity prices are a transmission factor in the Indian economy, increases in the prices of mineral oils, crude oil, minerals and base metals are reflected in wholesale inflation, ”a- he declared.

India Ratings and Research estimates that wholesale inflation will remain high until October 2021.

Nayar, of ICRA, said that “although it is not a central driver, the continuation of double-digit WPI inflation and its potential future fallout on CPI inflation will inject unease into the the tone of monetary policy ”.

ITM B-School HoD, Financial Markets, Krupesh Thakkar said whether or not inflationary pressures are reduced will depend more on the monsoon and on easing supply side pressures once restrictions due to COVID are lifted. –PTI

Read also: Retail sales inflation in India climbs to 6.3% in May from 4.23% in April

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