Inflation based on wholesale prices has surged to 5.77% in June on increasing prices of vegetables and fuel items.

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The wholesale price index (WPI) inflation is at the highest level since 5.9% seen in December 2013. It was 4.43% in the preceding month and 0.90% in June last year.

According to the government data released on Monday, inflation in food articles stood at 1.80% in June, as against 1.60% in May 2018.

The WPI inflation for April was revised upwards to 3.62% from the provisional estimate of 3.18%.

According to Icra's principal economist Aditi Nayar, the lagged transmission of higher crude oil prices, an uptick in cotton prices and electricity tariffs, the hardening of inflation for manufactured products as well as an unfavourable base effect led to the sharp pickup in inflation in June. "The sharper-than-expected uptick in the WPI inflation in June 2018 reinforces our expectation of a likely repo rate hike at the next monetary policy committee meeting in August 2018," she said.

Data released last week showed retail inflation shot up to a five-month high of 5% in June on costlier fuel. Reserve Bank of India (RBI) takes into account retail inflation data while formulating monetary policy. The central bank targets to keep inflation at 4%, (+/- 2%), and its rise beyond this comfort zone will put pressure on the central bank to hike rates.

The next meeting of the RBI's interest rate-fixing panel is from July 30 to August 1.

In its second monetary policy review for the fiscal, RBI last month hiked interest rate by 0.25% -- the first hike in more than four years -- due to growing concerns about inflation stoked by rising global crude oil prices as well as domestic price increases. The price of Indian basket of crude surged from $66 a barrel in April to around $74 currently.

...& ANALYSIS

  • The wholesale price index (WPI) inflation is at the highest level since 5.9% seen in December 2013  
  • Inflation in food articles stood at 1.80% in June 2018, as against 1.60% in the preceding month

(With inputs from agencies)