Wholesale inflation falls to 8-yr low

New Delhi: The wholesale price-based inflation rate declined to (-) 4.12 per cent in June on easing prices of food, fuel and manufactured items.The wholesale price index (WPI) based inflation in May was (-) 3.48 per cent. In June last year, it was 16.23 per cent. Inflation in food articles declined to (-) 1.24 per cent in June against (-) 1.59 per cent in May, the Commerce and Industry Ministry said in a release on Friday. At -4.12 per cent, the WPI inflation has hit its lowest level since October 2015, when it had fallen to -4.76 per cent.

Fuel and power basket inflation eased to (-) 12.63 per cent in June from (-) 9.17 per cent in May. In manufactured products, the inflation rate was (-) 2.71 per cent in the month under review against (-) 2.97 per cent in May. The decline in the rate of inflation in June 2023 is primarily due to a fall in prices of mineral oils, food products, basic metals, crude petroleum & natural gas and textiles, the release said.

With a weightage of 0.57 per cent in the CPI basket, pricing pressures in tomato is unlikely to substantially impact the headline inflation unless prices of other two main crops (potato and onion) move in tandem, JM Financial Institutional Securities said in a research.

The higher than expected headline inflation (4.81 per cent vs 4.6 per cent est.) was on the back of sharp uptick in inflationary pressures in the vegetables and pulses category.

The deflationary trend in the vegetable category almost reverted to inflationary phase (-0.9 per cent YoY vs -8 per cent YoY prior) in June’23, with a substantially strong momentum (12.2 per cent MoM vs 3.6 per cent MoM prior).

Within vegetables, retail prices of tomato increased to Rs 57/kg by the end of June, while at the start of the month it was available at Rs 25/kg. It is pertinent to note that by 10th of July, tomato was trading at Rs 105.4/kg which would reflect in the July month’s inflation print unless appropriate supply side interventions are taken to ease the pricing pressures, the report said.

Tomato has a weightage of 0.57 per cent in the CPI basket while Tomato, Potato and Onion collectively forms 2.2 per cent of the CPI basket, we believe that pricing pressures in tomato alone would marginally impact the CPI print unless the prices of other two crops move in tandem, the report said.