The wholesale price index contracted for the third straight month in June because of the continuous fall in the prices of manufactured products.
Wholesale price index (WPI) based inflation at -4.12 per cent is the lowest since October 2015 (-4.76 per cent), according to official data released Friday.
The deflation in WPI is in contrast with June retail inflation which inched up to 4.8 per cent from 4.3 per cent in May.
“This was the steepest contraction (annual) witnessed in about eight years helped by continued easing of energy, chemicals and metals prices. Weak economic data from China is keeping the global commodity prices low, which in turn is supporting moderation in WPI inflation,” Rajini Sinha, chief economist, CareEdge said.
“The sharp sequential uptick in food prices due to vegetables, milk, pulses and cereals is concerning. Nonetheless, given the higher weightage of energy and manufactured products in the WPI basket, we expect WPI inflation to remain in a contractionary zone in the first half of FY24. Contraction in the WPI index is likely to have a moderating impact on CPI inflation with a lag.”
Aditi Nayar, chief economist, Icra said: “Softer year-on-year prints for crude petroleum and natural gas, fuel and power, and minerals, outweighed the uptick seen in manufactured food products and ‘‘core’’ (manufactured non-food) items in June 2023, relative to the prior month.”
She said WPI deflation will narrow down to 2-2.5 per cent this month owing to a sequential uptick in food as well as global commodity prices.
“Icra expects the index to emerge from deflation in September 2023, after a gap of five months,” she added.
“The deflation in the manufacturing price index could be a cause of concern as it usually indicates weaker economic activity in the future. A jump in vegetable prices will be keenly tracked by the RBI as it might hurt the CPI (consumer price index) trajectory going ahead,” Mohit Ralhan, CEO, TIW Capital, said.