WPI inflation eases to 0.9% in June

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The prices of major food items such as vegetables, potatoes and pulses saw a sharp drop in June.

The index for "Manufacture of Wearing Apparel" sub-group declined by 0.2 per cent to 133.2 in June, 2017 from 133.5 for the previous month due to lower price of manufacture of wearing apparel (woven), except fur apparel (1 per cent).

The segment of fuel and power saw some easing of inflation in June at 5.28%, from 11.69% in May. Wholesale inflation remained low in May touching 2.17 percent and (-) 0.09 percent in June previous year. The manufactured product inflation stood at 2.27%.

After a multi-year low retail price inflation, India's wholesale price inflation eased 0.9% in June, driven by softening food prices. On the other hand, inflation of fruits, "egg, meat & fish", coking coal, beverages, leather products, wood products, media, chemical products, other non-metallic mineral products, basic metals, electrical equipment, furniture, and other manufacturing increased in June 2017. Inflation was forecast to ease moderately to 1.39 percent.

"CII strongly recommends a rate cut of 50 basis points in the forthcoming monetary policy to provide a fillip to demand".

Soon after retail inflation hit a record low, Chief Economic Advisor Arvind Subramanian had said there had been a "paradigm shift" in inflation trajectory and that has been "missed by all".

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"The decline in the WPI inflation in June 2017 reinforces our expectation that the MPC will reduce the repo rate by 25 bps in their August 2017 meeting, in a split vote", said Aditi Nayar, Principal Economist, ICRA.

Data released earlier this week showed that consumer price inflation slowed to 1.54 percent in June, the lowest since the series began in 2012.

His comments were seen as an apparent reference to the decision of the Monetary Policy Committee, chaired by RBI Governor Urjit Patel, which has kept the key policy rate unchanged so far this year citing pricing pressures.

The factory output growth came down 1.7% in May from 8% in the corresponding period a year ago. WPI has undergone seven revisions in base year, from time to time. Manufactured product inflation read 2.27 per cent.

The base year of the current WPI, which was revised in June from 2004-05 to 2011-12, does not include indirect taxes, thus decreasing volatility in inflation at wholesale level.

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