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Inflation rises to a four year high as fuel, food prices rise

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India’s wholesale inflation, or WPI, in June reached a four and a half year high, indicating that prices for bulk purchases for traders rose during the month.

At 5.77% in June, the WPI was driven by some food items and fuel prices. A higher inflation in June can also be attributed to an unfavourable base effect. WPI witnessed a growth of 4.43% in May and 0.90% in June 2017.

This is the third economic indicator data, released by the government, which has shown negative trend.

Last week, retail inflation grew 5 percent in June, a five-month high, from May’s 4.87 percent on the back of rising fuel prices. Moreover, IIP or factory output witnessed a tepid growth of 3.2% in May as compared with 4.9% jump in April, owing to sluggish manufacturing output.

A higher inflation for the month of June keeps the chances alive of a further rate hike in the month August, according to economists.

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“The lagged transmission of higher crude oil prices, an uptick in cotton prices and electricity tariffs, the hardening of inflation for manufactured products as well as an unfavourable base effect, led to the sharp pickup in the WPI inflation to a 54 month high in June 2018,” Aditi Nayar, Principal Economist at ICRA told ANI.

WPI data showed: 

  • A sharp jump in the prices of vegetables prices in June. It was 8.12% in June as compared with a growth of 2.51% in May. Continuing with the trend, potato price peaked, rising 99.02 percent in June from 81.93 percent in May.
  • Fuel and power inflation, which has a weightage of 13.15%in WPI, grew at 16.18% in June from 11.22% in May. Petrol prices are up 17.45% in June from 13.90 in May, while diesel prices grew 21.63% in June as compared to 17.34 percent in May.
  • Primary articles, which account for more than a fifth of the entire wholesale price index witnessed a uptick to 5.3% in June from 3.16% in May fuelled by higher prices of cereals, wheat, vegetables, potatoes, non-food articles, fibers and minerals.
  • Food articles saw a slight increase, growing 1.8 percent in June from 1.6 percent a month ago.
  • Prices of pulses have continued to slump for over a year now, with rate of decline relatively slowing at (-) 20.23% in June, as compared with de-growth of (-) 21.13% in May.

(With ANI inputs)

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