Wholesale Inflation In India Surges To 16-Month High In June

New Delhi, Jul 16 (KNN) India's wholesale inflation rate surged to a 16-month high of 3.4 per cent in June 2024, up from 2.6 per cent in May, according to government data released on July 15.

The increase was primarily driven by rising food prices and a rebound in manufactured product inflation. This marks a significant shift from the deflationary trend observed in the previous fiscal year.

The food sector played a crucial role in this inflationary spike, with wholesale food inflation reaching 8.7 per cent, a 20-month high.

Six out of ten major food categories experienced double-digit inflation, highlighting the broad-based nature of the increase.

Notably, inflation in manufactured goods, which account for nearly two-thirds of the index weight, rose to 1.43 per cent from 0.8 per cent in May.

The fuel and power component, after 12 months of deflation, turned inflationary in May and registered 1.03 per cent inflation in June.

On a month-to-month basis, wholesale prices increased by 0.4 per cent from May to June, with the food index rising 2.5 per cent and manufactured products up 0.14 per cent.

Aditi Nayar, Chief Economist, ICRA, noted that the inflation jump was in line with expectations, reflecting a consistent upward trend over the past three months.

The surge in food prices, particularly in vegetables like onions and potatoes, has been a major contributor to the overall inflation.

This trend is mirrored in the consumer price index, where food inflation has pushed retail inflation above 5 per cent for the first time in four months.

Despite the rising inflation and improved industrial production, experts anticipate that the Reserve Bank of India will maintain the policy rate at 6.5 per cent during its August meeting.

Some analysts have pushed their expectations for a rate cut to December, making it contingent on the progress of the monsoon season.

Looking ahead, economists project a potential easing of inflationary pressures in July due to favourable base effects and softening global commodity prices.

However, the wholesale price inflation for the fiscal year 2025 is expected to trend upwards, with estimates averaging around 3 per cent.

This outlook is based on the anticipation of normal monsoon conditions, which are crucial for agricultural production and food prices.

The current inflationary situation underscores the delicate balance the central bank must maintain between controlling inflation and supporting economic growth.

As India navigates through these economic challenges, the interplay between food prices, global commodity trends, and monetary policy will be crucial in shaping the country's economic trajectory in the coming months.

(KNN Bureau)