Home ›› 15 Jul 2022 ›› Asia Biz
India’s annual wholesale price-based inflation kept above 15 per cent in June, government data showed on Thursday, but the slight easing from the prior month’s three-decade high of 15.88 per cent strengthens prospects for more rate hikes next month by the central bank.
Economists say inflation, driven by higher global crude oil and domestic prices, has shown little sign of cooling, despite a rise of 90 basis points in the benchmark rate of the Reserve Bank of India (RBI) over the last two months and export curbs.
Wholesale prices (INWPI=ECI), akin to producer prices, eased slightly to 15.18 per cent, but stayed in double digits for a 15th straight month, the data showed.
A depreciation of nearly 7 per cent this year in the rupee currency against the dollar has pushed up prices of imported food and energy products for companies as well as consumers.
June’s figure was lower than a forecast of 15.50 per cent in a Reuters poll of analysts, and compared to 12.07 per cent in June 2021.
Aditi Nayar, chief economist at ICRA, the Indian arm of Moody’s rating agency, said WPI inflation could ease to 13 per cent in July, reflecting correction in global commodity and fuel prices, which surged after Russia’s invasion of Ukraine in February.
“We foresee 60 basis points of rate hikes by the Monetary Policy Committee (MPC) over the next two reviews,” she said, referring to the central bank’s rate-setting panel.
The repo rate could rise to 5.5 per cent by September, followed by a pause to ascertain economic growth momentum, she added.
The high inflation was mainly fuelled by rising prices of crude petroleum and natural gas, food items, basic metals and chemical products, the commerce ministry said in a statement.
On Tuesday, India reported annual consumer inflation stayed above 7 per cent in June and beyond the central bank’s tolerance band for the sixth month in a row, contributing to the prospects of more rate hikes next month.
The RBI’s MPC raised its benchmark repo rate (INREPO=ECI) by 50 basis points to 4.90 per cent last month and hinted at more rate hikes to come.
It will meet from Aug. 2 to 4 amid widely-held expectations of rate hikes of 25 to 50 basis points.
Wholesale food prices, contributing about a quarter of the WPI index, climbed 12.41 per cent in June from 10.89 per cent in May, although vegetable prices rose 56.75 per cent on the year, versus 18.26 per cent the previous month.
An uptick in wholesale food and energy prices is likely to feed into retail prices as companies increasingly pass on high input costs to consumers.
