DNA Money Edit: Wholesale price woes kick off
The sharper-than-expected surge in the WPI may force RBI to hike repo rate when its monetary policy committee meets on July 31
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.