Wholesale Inflation Softens to 2.02%

A fall in energy prices and a moderate rise in prices of manufactured goods helped wholesale price-based inflation slow down for the second straight month and touch a 23-month low of 2% in June, as against 5.7% a year ago and 2.5% in May 2019.

In contrast, primary articles saw a rise with the food segment witnessing an increase of close to 7% in June, driven by a spike in prices of pulses, vegetables and onion. Economists attributed the over 23% rise in pulses to lower sowing, with the impact visible in the retail prices of tur and other daals.

Although monsoon has revived, economists are keeping a close watch as poor rains will have an adverse impact on food prices, something that policymakers are wary of.

Others also warned on some impact of the recent increase in taxes on fuel prices, which could stoke inflation.

On Friday, data released by the government showed that retail inflation had risen to a six-month high of 3.2% in June. So, what explains the divergence in the two inflation numbers? “Unlike the CPI where the weight (of primary products) in the index is higher, in case of WPI, manufactured products dominate and hence the overall impact of food inflation is less stark on headline inflation. Hence,... CPI inflation (will) be at a higher level than WPI inflation for the coming months,” CARE Ratings said in a statement.

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