India's June WPI inflation eases on lower prices of food, primary articles

7/14/2021

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Lower food prices aided in sequentially lowering India's annual rate of inflation, based on wholesale prices, in June.

However, the inflation rate alarmingly remained above the 12 per cent mark.

The WPI rose to 12.07 per cent in June from a rise of 12.94 per cent in May.

The monthly rate of inflation, in June 2020, stood at (-) 1.81 per cent.

On a sequential basis, the month over month change in WPI index for June 2021 as compared to May, was 0.75 per cent.

"The high rate of inflation in June 2021 is primarily due to low base effect and rise in prices of mineral oils viz. petrol, diesel (HSD), naphtha, ATF, furnace oil etc, and manufactured products like basic metal, food products, chemical products etc as compared the corresponding month of the previous year," a Ministry of Commerce and Industry statement said.

The low base effect has been attributed to last year's full nationwide lockdown which was imposed to curb the spread of the Covid-19 pandemic.

On a segment-wise basis, prices of primary articles, which constitute 22.62 per cent of the WPI's total weightage, rose at a slower rate of 7.74 per cent last month from 9.61 per cent in May 2021.

Similarly, WPI food index rose by 6.66 per cent from 8.11 per cent reported for May.

The prices of manufactured items rose by 10.88 per cent from 10.83 per cent.

On the same note, the prices of fuel and power, with a weightage of 13.15 per cent, remained at an elevated 32.83 per cent from 37.61 per cent.

Diesel prices rose at a slower rate of 59.92 per cent in June against 66.30 per cent during May.

During the same period, petrol prices rose by 59.94 per cent in June from 62.28 per cent.

Key consumables such as potato became a bit inexpensive. Its prices deflated by (-) 30.97 per cent against (-) 27.90 per cent.

Vegetable prices fell by (-) 0.78 per cent against (-) 9 per cent.

Prices of pulses rose by 11.49 per cent last month from 12.09 per cent.

"Clearly, the steady pass-through of increased costs in manufactured products has spillover risks to CPI inflation in the near term," Acuite Ratings & Research's Chief Analytical Officer, Suman Chowdhury, said.

"However, a benign food inflation print and a moderate growth in overall demand may help to keep the inflation risks under control over the next 2 quarters."

India Ratings & Research's Principal Economist Sunil Kumar Sinha said: "Firming of inflation despite weak demand conditions needs some elaboration. It appears that a large part of the rise inflation could be called or attributed to imported inflation."

"As global commodity prices are a pass through in the Indian economy, price increase in mineral oils, crude petroleum, minerals and basic metals are finding a reflection in the wholesale inflation."

Source: IANS

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