In an encouraging sign, India's main inflation gauge, based on monthly WPI, softened to four months low of 5.43% for the month of June as compared to 6.01% in the previous month and 5.16% during the corresponding month of the previous year. The figure was much lower than the expectation of over 5.5%. However, in a negative surprise, April inflation figures were revised upwards to 5.55% from 5.20% earlier. Meanwhile, build up inflation rate in the financial year so far was 1.28% compared to a build up rate of 1.82% in the corresponding period of the previous year.
The decline in headline inflation was mainly on account of meager growth in Manufacture Products index and Fuel & Power index. The index of Manufacture Products, which occupies the majority 64.97% weight in WPI index, rose by a meager 0.2% to 154.9 (provisional) from 154.6 (provisional) in May. However, manufactured products inflation increased marginally to 3.61% versus 3.55% month-on-month.
Meanwhile, Fuel & Power index, which occupies 14.91% weight in the overall index, rose by 0.1% to 212.3 (provisional) from 212.1 (provisional) for the previous month, due to higher price of high speed diesel and lignite (1% each). The price of aviation turbine fuel and bitumen (2% each) and kerosene (1%) declined.
However, Primary article index, which occupies 20.12% weight in the overall headline index, also rose 1.3% to 249.9 (provisional) from 246.8 (provisional) for the previous month. Out of the index, while the index for ‘Food Articles’ group rose by 2.2% to 249.7 (provisional) from 244.3 (provisional) for the previous month, index for ‘Non-Food Articles’ group declined by 1.1% to 216.4 (provisional) for the month under review from 218.8 (provisional) in May.
Besides, the higher revision of April month inflation figure, another matter of concern remains to core inflation, which continues to be sticky at 3.9% v/s 3.8% (M-o-M). Consequently, the Reserve Bank of India (RBI) is expected to keep the interest rates on hold despite easing trend in inflation on account of growing risk of drought shriveling summer crops.
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