Wholesale price in deflationary zone for third month in a row

Wholesale tomato prices in June rose a staggering 56per cent month-on-month, official data showed on Friday. However, Wholesale Price Index (WPI) based inflation remained in the negative territory for the third straight month due to high base effect. This is the first time that the increase in tomato prices has been reflected in government data.

WPI inflation declined to nearly eight-year low of -4.12per cent in June as compared to -3.48per cent in the previous month, as per data released by the Ministry of Commerce & Industry. June WPI data is the lowest since October 2015 when it had fallen to 4.76per cent.

Also read | Retail inflation jumps to 4.81per cent in June on surge in food prices

A sharp drop in the WPI inflation in the recent months is mainly due to favourable base effect. The wholesale price index based inflation stood at 16.23per cent in June 2022. The wholesale price inflation data is in contrast with the acceleration in price rise in retail markets, which rose in June due to surge in food prices and fading impact of the base effect.

On a month-on-month basis there was a spike in the prices of food items in retail as well as wholesale markets. The WPI-based food index was 1.4per cent higher in June when compared with May.

While there has been a sharp jump in the prices of tomatoes in both retail as well as the wholesale markets, its impact on the overall inflation data is not that significant because of low weight. Tomatoes have 0.28per cent weight in WPI basket while its weight in CPI basket stand at 0.57per cent.

“The decline in the rate of inflation in June 2023 is primarily due to fall in prices of mineral oils, food products, basic metals, crude petroleum & natural gas and textiles,” Ministry of Commerce & Industry said in a statement.

“The deflation in the manufacturing price index could be a cause of concern as it usually indicates weaker economic activity in the future,” said Mohit Ralhan, Chief Executive Officer, TIW Capital. “Jump in vegetable prices will be keenly tracked by the RBI as it might hurt the CPI trajectory going ahead,” he added.