Inflation based on wholesale prices fell to 12.07 percent in June despite rising prices for manufactured goods, according to government data. WPI-based inflation eased slightly from the record 12.94 percent recorded in May.
However, WPI inflation remained in double digits for the third consecutive month in June.
While WPI inflation eased slightly in June, it remained high due to a weak base effect. It stood at (-) 1.81% in the corresponding month of 2020.
“The high inflation rate in June 2021 is mainly due to the weak base effect and the increase in the prices of mineral oils namely gasoline, diesel (HSD), naphtha, ATF, fuel oil, etc., and manufactured products like base metals, food products, chemicals, etc. compared to the corresponding month of the previous year, ”said the Ministry of Commerce and Industry.
Fuel prices rose 32.83 percent in June, while prices for manufactured items rose nearly 11 percent, the data showed. In May, however, fuel and electricity inflation was recorded at 37.6 percent.
Prices for manufactured goods rose 10.88 percent, above 10.83 percent in May. This indicates a rise in the prices of manufactured goods.
Meanwhile, food prices for June stood at 6.66%, up from 8.1% last month.
The data indicates that there has been a marginal improvement in WPI-based inflation for fuel and food prices. Retail price inflation data released a few days ago also pointed to lower food prices.
Read | Retail price inflation slows slightly to 6.26% in June, above RBI target for 2nd consecutive month
While falling food prices are a good sign for the economy, increasing rates for manufactured goods may cause the economic recovery to slow down.
Several reports indicate that consumers are now buying products at low prices due to the recent price hikes of several products such as consumer goods and electronics. The lack of demand for more expensive goods could have a negative impact on the overall recovery in demand.