New Delhi, 15 July
Snapping the declining trend of four months, inflation rose to 4.86 per cent in June as kitchen items such as onion, rice and other cereals became costlier, adding to the woes of the government struggling to arrest the falling value of rupee that is putting pressure on prices.
Rising inflation will also have a bearing on the Reserve Bank’s first quarter monetary policy review on 30 July.
Inflation based on the wholesale price index (WPI) had stood at 4.70 per cent in May.
Food inflation rose to 9.74 per cent, driven by price rise in onion, cereals and rice in June, against 8.25 per cent in the previous month, as per the industry ministry data.
Vegetable prices went up by 16.47 per cent from 4.85 per cent in May. Inflation in onion shot up by 114 per cent in June as against 97.40 per cent in May.
Inflation in the manufactured items category, however, declined to 2.75 per cent in June from 3.11 per cent in May.
Chairman of the Prime Minister’s Economic Advisory Council, Mr C Rangarajan expressed apprehension that the rupee depreciation could have bearing on the price situation.
“Even though inflation has risen a little bit, WPI seems to be stabilising…(but) going ahead there will be impact of rupee depreciation (on prices),” he said.
On the possibility of interest rate cut by RBI in its forthcoming policy, Mr Rangarajan said: “RBI faces the difficult choice of controlling inflation, growth needs stimulus, but external situation remains a concern. The RBI will take all these three factors into account.”
The value of the rupee, which touched an all-time low of 61.21 to a dollar earlier this month, is fuelling inflation, especially in the prices of petroleum products. The government as well as the RBI have been taking steps to strengthen the rupee. The consumer price index (CPI) based retail inflation for June had also inched up marginally.
As per the WPI data, non-food articles category which includes fibre, oil seeds and minerals, saw a sharp rise in inflation to 7.57 per cent, from 4.88 per cent in May.
Meanwhile, inflation for April has been revised downwards to 4.77 per cent from 4.89 per cent.
Inflation in egg, meat and fish was 12.23 per cent during June as compared to 11.21 per cent in May. Price rise in cereals and rice was high at 17.18 and 19.11 per cent.
Potatoes, however, saw decline in rate of price rise to (-)14.22 per cent, from (-)3.44 per cent in May. Pulses too declined sharply to 1.59 per cent during June, from 5.95 per cent in May.
Chief economist of Bank of Baroda Rupa Rege Nitsure opined that the June WPI does not appropriately factor in the impact of recent adjustments in administered fuel prices and rupee depreciation. “There will be an upward revision in this number, going forward,” she added.
For the fuel and power basket, inflation was lower at 7.12 per cent in June as compared to 7.32 per cent in May.
Ficci president Naina Lal Kidwai said the industry body will like to reiterate the need to gear up steps to address supply side bottlenecks.