India's wholesale price index (WPI) inflation soared to 3.36% in June, the highest in 16 months, primarily due to increased prices of food articles and manufactured goods. This was a significant rise from 2.61% in May and a stark contrast to the -4.18% seen in June 2023. The last peak was 3.85% in February 2023.
Food articles drive inflation
According to the Ministry of Commerce & Industry, the inflation spike was driven by costlier food articles, crude petroleum, natural gas, and manufactured goods. Food article inflation surged to 10.87% in June from 9.82% in May. Vegetable inflation was particularly high, at 38.76%, with onions at 93.35% and potatoes at 66.37%. Pulses also saw a significant rise at 21.64%.
Sector-specific increases
Vegetables: 38.76% inflation, up from 32.42% in May.
Onions: 93.35% inflation.
Potatoes: 66.37% inflation.
Pulses: 21.64% inflation.
Fruits: 10.14% inflation.
Cereals: 9.27% inflation.
Milk: 3.37% inflation.
Broader impact on inflation
ICRA Chief Economist Aditi Nayar noted that the rise in WPI inflation was broad-based, excluding the fuel and power segment. She anticipates a dip in headline WPI inflation to about 2% in July 2024, influenced by a favorable base and a potential cooling in global commodity prices.
Fuel and power inflation
Inflation in the fuel and power basket slightly decreased to 1.03% from 1.35% in May. However, the inflation for crude petroleum and natural gas remained in double digits at 12.55%.
Manufactured products
Inflation in manufactured products rose to 1.43% in June from 0.78% in May, indicating a widespread increase in costs across various sectors.
Alignment with retail inflation
The rise in WPI inflation aligns with retail inflation trends, which climbed to a four-month high of 5.1% in June. The Reserve Bank of India (RBI) primarily considers retail inflation when setting monetary policy.
Outlook
Nayar cautioned that higher crude oil prices, driven by supply-demand mismatches, could exert upward pressure on WPI inflation in July. The average price of the Indian crude oil basket has been volatile, adding to inflationary concerns.
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