DNA Money Edit: Wholesale price woes kick off

As the wholesale price index (WPI) based inflation surges to 4.5-year high at 5.77% in June, it vindicates the fear of the Reserve Bank of India (RBI). The central bank had revised upwards its retail inflation projection for October-March to 4.7% from 4.4% earlier.

A surge in prices of manufactured products, crude oil, cotton and electricity tariffs has led to a sharp pick-up in inflation in June. According to the numbers published by the government, inflation in vegetables jumped to 8.12%, from 2.51% in the previous month. Inflation in ‘fuel and power’ basket too rose sharply to 16.18% in June from 11.22% in May as prices of domestic fuel increased during the month in line with rising global crude oil rates. 

However, crude oil prices have dipped marginally to $75.07 a barrel as concerns about supply disruptions eased and Libyan ports resumed export activities, while traders eyed potential supply increases by Russia and other oil producers. Potato inflation was at a peak of 99.02%, against 81.93% in May. Price rise in onion was 18.25% during June, as against 13.20% in the preceding month. On the flip side, deflation continued in pulses at 20.23% in June.

The sharper-than-expected surge in the WPI may force RBI to hike repo rate when its monetary policy committee meets on July 31.