WPI at -2.4% in June, extends deflation to eighth month

Remaining in negative zone for the eighth consecutive month and its lowest since November 2014, the annual rate of inflation, based on monthly Wholesale Price Index (WPI) Inflation, stood at -2.40% (provisional) for the month of June, 2015 (over June, 2014) as compared to -2.36% (provisional) for the previous month and 5.66% during the corresponding month of the previous year. Build up inflation rate in the financial year so far was 1.42% compared to a build up rate of 1.50% in the corresponding period of the previous year.

Component wise, inflation in primary articles having weight of 20.12% rose by 1.4 percent to 248.4 (provisional) from 244.9 (provisional) for the previous month. In primary articles the index for ‘Food Articles’ group rose by 1.3 percent to 257.3 (provisional) from 253.9 (provisional) for the previous month. The index for ‘Non-Food Articles’ group rose by 2.2 percent to 218.5 (provisional) from 213.9 (provisional) for the previous month, while the index for Minerals  group rose by 0.3 percent to  248.5 (provisional) from 247.7  (provisional) for the previous month.

Fuel & Power having weight of 14.91% too witnessed rise of 0.6 percent to 191.0 (provisional) from 189.8 (provisional) for the previous month, due to higher price of aviation turbine fuel, petrol and kerosene.

Manufactured Products, the major group having weight of 64.97%, witnessed modest rise of 0.1 percent to 154.2 (provisional) from 154.1 (provisional) for the previous month. Of the manufactured products, the index for Food Products group rose by 0.8 percent to 173.1 (provisional) from 171.7 (provisional). The other groups which showed rise in the month of June included Textiles, Wood & Wood Products, Paper & Paper Products, Leather & Leather Products, Rubber & Plastic Products, Chemicals & Chemical Products, Machinery & Machine Tools and Transport, Equipment & Parts.

On the other hand, index for ‘Non-Metallic Mineral Products’, ‘Basic Metals, Alloys & Metal Products’ groups from the manufactured product groups witnessed decline in the month of June.

The conflicting numbers of WPI and CPI inflation may give some hopes of rate cuts again but the major concern is the rise in food articles and as the RBI is now guided by movements in consumer price inflation for deciding its monetary stance, it will closely observe the trends in food inflation and the monsoon rain, crucial for the summer-sown kharif crop.