India’s wholesale inflation worsens to 16-month high of 3.36%

 INDIA- According to government data, India’s wholesale price index (WPI) has surged to a 16-month high of 3.36% for the month of June, indicating an exacerbation of the country’s inflation challenges. 

The current WPI has increased by 0.75% compared to May, which was a 15 month high of 2.61%. general inflation was 8.8% in June, compared to 7.2% in May. The government data also revealed energy inflation experienced moderate growth of 1.35% from 1.03% recorded in May.  

Manufacturing inflation also increased moderately to 1.43% in June compared to 0.78% in May. Food inflation also increased moderately to 8.68% in June compared to 7.4% in May. 

The rise in inflation is attributed to an increase in the cost of raw materials and agricultural products. 

The official press release said, “Positive rate of inflation in June, 2024 is primarily due to increase in prices of food articles, manufacture of food products, crude petroleum & natural gas, mineral oils, other manufacturing etc.” 

The prices of vegetable prices increased by 38.76% in June, compared to a 22% contraction in June 2023. Fruit prices also increased by 10.14% in June compared to a 2% contraction in the same month last year. The prices of pulses also increased by 21.64%, compared to 9.21% recorded in the same month last year. 

RBI Governor warned of the need to implement corrective policy interventions to curb food inflation, which threatens to derail India’s path to disinflation. However, these mitigation efforts are not necessarily easy to implement, owing to persistent price uncertainties in the food sector. 

Radhika Rao, Executive Director and Senior Economist at DBS Bank said, “Higher food perishables were offset by disinflation in the fuel and broader non-food segments, helping to keep the headline print close to our forecast at 4.8% YoY, the softest print in nearly a year.” 

RBI last increased its repo rate to 6.5% in May 2022 but has since maintained it at this percentage to fight inflation. According to market analysts, RBI is not likely to increase its repo rate despite the sharp increase in wholesale and food inflation, primarily because general inflation remains benign.  

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