Wholesale inflation fell to 0.90 % in June -- the lowest in at least eight months -- as prices in food articles, including vegetables, eased off.
Inflation based on the wholesale price index (WPI) was 2.17 % in May 2017 and (-)0.09 % in June 2016.
The slowdown in wholesale inflation comes against the backdrop of retail inflation easing to a record low of 1.54 % in June. The WPI figure is at the lowest level in at least eight months -- since the availability of data for the new 2011-12 base year series.
Prices of food articles contracted by 3.47 % in June on a yearly basis. Vegetable inflation stood at (-)21.16 %. Potato saw a maximum deflation of 47.32 %, followed by pulses at 25.47 %. For onion, deflation was 9.47 % in June. The rate of price increase was 1.93 % in cereals while that of protein-rich items like egg, meat and fish was 1.92 % in June.
Fuel and power segment saw massive fall in inflation at 5.28 %, from 11.69 % in May. Manufactured product inflation was 2.27 %.
Soon after retail inflation hit a record low, Chief Economic Advisor Arvind Subramanian had said there had been a “paradigm shift” in inflation trajectory and that has been “missed by all”. He was referring to RBI not cutting interest rates despite such low inflations.
RBI Governor Urjit Patel has kept the key policy rate unchanged so far this year citing pricing pressures.
Besides, industrial production data showed that the growth in factory output slumped to 1.7 % in May, from 8 % a year ago.
The final print of April WPI inflation remained unchanged at 3.85 %.
“Both wholesale and retail prices data released this week report a broad based moderation in prices. Food inflation has softened considerably over the past couple of months and the outlook for prices is also benign. The continuous moderation in prices bodes well for the economy and FICCI feels that there is a clear case for the central bank to consider moving to an accommodative stance and introducing a rate cut by at least 50 basis points in the upcoming policy review or even earlier”, said Pankaj R Patel, President, FICCI.
“The latest IIP numbers report a further slowdown in industrial activity and the investment cycle is yet to gain momentum. A cut in the repo rate at this juncture will help in improving the demand situation and support growth”, Mr Patel added.
Commenting on the WPI inflation data, Chandrajit Banerjee, Director General, CII said that the continuous easing of the WPI inflation print over the last few months, culminating in prices touching a record low in June 2017, reflects a paradigm shift towards an era of benign inflation. At a time when the retail inflation is also converging to a new low, it is apparent that overall price pressures are presently subdued in the economy.
"The declining inflation scenario, which has been undershooting the Central Bank’s inflation target by a large margin, should induce the RBI to resume its rate easing cycle. CII strongly recommends a rate cut of 50 basis points in the forthcoming monetary policy to provide a fillip to demand", said Banerjee.