WPI for June highest since December 2013

The wholesale price inflation in June rose to a four-and-a-half year high of 5.77% on the back of higher fuel and vegetable prices.

The government data showed fuel and power inflation rose 16.18% in June from 11.22% in May while vegetable inflation went up to 8.12% from 2.51% in May.

The prices of manufacturing products too rose 4.17% in June while the primary article prices rose 5.3% in June.

The inflation figure in June is the highest since December 2013 raising a spectre of further rate hike by the Reserve Bank of India in the policy decision next month.

Higher crude oil prices in the global market sent fuel and power inflation to a 5% high in one month. In the vegetable segment, potato was the costliest at 99.02%.

ICRA Principal Economist Aditi Nayar said the lagged transmission of higher crude oil prices, an uptick in cotton prices and electricity tariffs, the hardening of inflation for manufactured products as well as an unfavourable base effect, led to the sharp pickup in inflation in June. “The sharper than expected uptick in the WPI inflation in June 2018 reinforces our expectation of a likely repo rate hike at the next monetary policy committee meeting in August 2018,” she said.

The rise in WPI inflation comes on the back of a 5-month high retail price inflation which too touched 5% in June. Price of pulses, however, remained depressed in June showing a deflation at 20.23%.

The hike in minimum support prices for procurement of food grains is expected to fan inflation print further in coming months and may put pressure on the RBI to hike policy interest rates in its August policy. The central bank had already hiked interest rate by 0.25% in June.