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India' WPI inflation for June 2011 inched up to 9.44% from 9.06% in May 2011. The inflation figure for June 2011 was driven up by higher inflation for food products, crude petroleum, mineral oils and beverage & tobacco products. However, the inflation for fruits, vegetables, fibers, textile items and transport equipments eased during June 2011 from May 2011 level. The inflation has continued to be above 8% mark for last 18 sequential months up to June 2011, while it was above 9% mark for 14 out of these 18 months. The inflation also remains above 9% mark for last seven sequential months.
The rise in wholesale price index during June 2011 at 9.44% was below the expectations. As per Capital Market's poll of economist, the WPI inflation for June 2011 was expected to accelerate to 9.7%. The economists responding to the poll had projected the inflation in the range of 8.7% to 10.0% for June 2011. The median of the economists forecast's for inflation for June 2011 stood at 10.0%.
The inflation for primary articles increased to 12.2% in June from 11.3% in May 2011, while snapping moderation for last four sequential months by cumulative 714 bps. The increase in inflation for primary articles was mainly driven by sharp fall in inflation for minerals (from 11.9% to 27.0%). Meanwhile, the inflation for food articles was steady at 8.4% and that for non-food articles eased to 18.6% in June 2011 from 22.4% in May 2011.
The contribution of primary articles to the overall inflation increased to 309 bps in June 2011 from 282 bps in May 2011. The contribution of fuel product group rose from 189 bps to 196 bps in June 2011, while that of manufactured products also moved up to 442 bps in June 2011 from 434 bps in May 2011. The contribution of food item (food articles and food products) rose to 234 bps in June 2011 from 220 bps in May 2011, while that of non-food items (all commodities excluding food items) jumped to 718 bps in June 2011 to 682 bps in May 2011.
The Ministry of Commerce has continued to revise provisional inflation data upwards. The upward revision in April 2011 data (base 2004-05:100) was made with higher revised inflation for primary articles and manufactured products at 15.1% and 6.8% compared to 12.08% and 6.18% reported earlier. Meanwhile, the inflation for fuel and power group was revised downwards to 13.04% for April 2011 from 13.32% reported earlier. The overall inflation for April 2011 has been scaled up to 9.74% from 8.66% reported earlier.
The official Wholesale Price Index for 'All Commodities' (Base: 2004-05=100) for the month of June 2011 rose by 0.9% from the previous months level. The annual rate of inflation, based on monthly WPI, stood at 9.44% (Provisional) for the month of June 2011 (over May 2010) as compared to 9.06% (Provisional) for the previous month and 10.25% during the corresponding month of the previous year.
Amidst deceleration in India's IIP growth, the WPI based inflation continues to rise higher. Though there are signs of some product prices easing, the overall WPI based inflation continues to march northwards, which is a cause for concern. In this background, RBI may well discount the deceleration in IIP growth, and give weightage to unacceptably high and rising inflation, and may well increase repo rates further by 25 basis points in the ensuing meet on 26th July 2011.
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