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WPI quickens to 4.86% in June; snaps three consecutive months easing trend

15 Jul 2013 Evaluate

Deviating from last three months of easing trend and adding to the woes of policy-makers, the annual rate of inflation, based on monthly WPI, shot up to 4.86% (Provisional) for the month of June, 2013 (over May, 2012) as compared to 4.70% (Provisional) for the previous month and 7.58% during the corresponding month of the previous year. However, the rate of uptick was lower than expected. Build up inflation in the financial year so far, was 1.53% compared to a build-up rate of 2.30% in the corresponding period of the previous year. Meanwhile in a pleasant surprise, April inflation figures were revised downward to 4.77% from 4.89%.

Manufactured products, which carry weight of 64.97% in the index, rose by 0.1% to 149.3 (Provisional) from 149.1 (Provisional) for the previous month. The index for 'Food Products' group rose by 0.4% to 167.7 (Provisional) from 167.1 (Provisional) for the previous month. The index of Fuel & Power, which has weight of 14.91%, rose by 1.0% to 194.0 (Provisional) from 192.0 (Provisional) for the previous month due to higher price of light diesel oil and naphtha (3% each), non-coking coal, furnace oil  and petrol (2% each) and high speed diesel and bitumen (1% each).

The index of Primary Articles, having weight of 20.12% too rose by 1.4% to 232.5 (Provisional) from 229.3 (Provisional) for the previous month. The index for 'Non-Food Articles' group rose by 0.1% to 208.8 (Provisional) from 208.5 (Provisional) for the previous month, however the index for 'Minerals' group declined by 6.2% to 324.9 (Provisional) from 346.5 (Provisional) for the previous month.

Adding to the set of gloomy data, headline inflation edged higher after a surprise drop in industrial output, a fall in exports and higher retail inflation. However, core wholesale price index, or inflation that excludes volatile food and fuel prices, is estimated to have eased to 2% from an annual 2.4% rise in May, which may provide the central bank with some room to cut policy rates by 25 basis points in its policy review at the end of this month.

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