“RBI would not be in a position to address the demand and supply in India when CPI is at high level, therefore now the economy of India is in need of strong actions from government to address the structural issues of demand and supply,” -Assocham / Industry body
New Delhi : Costlier vegetables, pulses and sugar pushed WPI inflation for the third straight month in June to 1.62 per cent, queering the pitch for the Reserve Bank to reduce rates in its August policy meet.
The wholesale price-based inflation, reflecting the annual rate of price rise, during June was also substantially higher than 0.79 per cent in May and (-)2.13 per cent in June 2015.
Wholesale price index (WPI) inflation in vegetables shot up by 16.91 per cent last month. While, inflation print for cereals stood at 6.32 per cent.
Potato, a daily consumable among Indian households, turned pretty expensive during the month as buyers had to shell out 64.48 per cent more than a year ago. Among others, the rate of price rise in pulses was at 26.61 per cent, sugar 26.09 per cent and that for fruits the inflation during the month rose by 5.97 per cent.
Overall food inflation was at 8.18 per cent, showed the data released by the Commerce Ministry. WPI inflation has been firming up for the last three months, after remaining in the negative zone for around one-and-a-half-years. An elevated wholesale inflation in June follows spike in retail inflation, announced on Tuesday, that hit a 22-month high of 5.77 per cent during the month. But, onion, minerals, fuel and power, and petrol became pocket friendly as prices declined by 28.60 per cent, 20.75 per cent, 3.62 per cent and 8.74 per cent, respectively.
Among manufactured articles, the wholesale inflation print read at 1.17 per cent in June and that for edible oils it firmed up by 3.42 per cent. “A jump of 37.4 per cent in cereals inflation between May and June is a cause of worry. Although monsoon is expected to be above normal this year but some delay in its reaching in many parts of country delayed the sowing kharif crop,” he said. “RBI would not be in a position to address the demand and supply in India when CPI is at high level, therefore now the economy of India is in need of strong actions from government to address the structural issues of demand and supply,” industry body Assocham said. India Ratings Principal Economist Sunil Kumar Sinha saidpick-up in wholesale inflation is mainly driven by rise in food inflation.
The rise in wholesale inflation is in line with expectations and is essentially on the back of rising food prices along with some catch up in commodity prices, Richa Gupta, Senior Economist at Deloitte, said. “Going ahead, expect inflation to move up further from current levels but remain capped on the back of subdued global commodity prices,” she added.
The Reserve Bank keeps a close vigil on retail inflation movements to arrive at its monetary policy. The next meeting is scheduled for August 9, however, rate cut signs are widely discarded as both retail and wholesale inflation have been witnessing a rising trend in the recent past.
