India WPI Inflation Contracts To 1.81% In June, Falls For Third Consecutive Month

Even as food prices continue to rise, India's WPI inflation has fallen for the third straight month in June.

New Delhi: Declining to 1.81 percent in June, prices in the wholesale market have fallen for the third consecutive month. Even as food articles remain expensive, fuel and power items have witnessed a sharp decline. 

In May and April, inflation was (-) 3.21 percent and (-) 1.57 percent respectively. In March, it was 0.42 percent.

"The annual rate of inflation, based on monthly Wholesale Price Index (WPI), stood at (-1.81 percent) (provisional) for the month of June 2020 as compared to 2.02 percent during the corresponding month of the previous year," the industry ministry stated on Tuesday.

Despite that, prices of food items have risen with inflation at 2.04 percent, as opposed to 1.13 percent in May.

Inflation in vegetables stood at (-) 9.21 percent and onions at (-) 15.27 percent. Rates of potatoes have gone up with inflation at 56.20 percent. Pulses have also gone through a rise in cost with inflation at 10.10 percent, the same goes for wheat which was 5.17 percent in June.

When it comes to fuel and power basket, inflation stood at (-) 13.60 percent in June, against 19.83 percent in the previous month.

Manufactured products have withstood inflation of 0.08 percent in June, against (-) 0.42 percent in May.

The data released on Monday revealed that retail inflation as measured by the consumer price index (CPI) increased to 6.09 percent in June, which is higher than the tolerance level of RBI.



ICRA Principal Economist Aditi Nayar informed the extent of disinflation in the WPI narrowed sharply in June 2020, with all the major sectors except minerals displaying a sequential uptick in their year-on-year inflation.

"The divergence between the food inflation at the wholesale and retail level narrowed considerably while remaining substantial in June 2020, pointing to the continued varied dynamics driving food prices as the country emerges from the lockdown," Nayar said.

With vegetable prices rising significantly in recent weeks, she observed that the uptrend in wholesale food inflation may go on in July 2020.

She said higher vegetable prices and stabilisation of crude oil prices at moderate levels are expected to contribute toward a further narrowing of the disinflation in the WPI in July 2020.

While formulating monetary policy, the Reserve Bank of India (RBI) takes into account retail inflation. The monetary policy framework of the RBI targets to keep inflation at 4 percent (+/-2 percent).

The RBI has cut interest rates by 250 basis points since February 2019 to boost economic activity.

RBI Governor Shaktikanta Das had last week said "the Indian economy has started showing signs of getting back to normalcy in response to the staggering easing of restrictions.

"It is, however, still uncertain when supply chains will be restored fully; how long will it take for demand conditions to normalise; and what kind of durable effects the pandemic will leave behind on our potential growth".

(With Agency Inputs)

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