Headline inflation down but food prices stubbornly high | SupportBiz

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Headline inflation down but food prices stubbornly high

India's headline inflation fell to 7.25 percent in June from 7.55 percent in the previous month, putting pressure on the Reserve Bank of India to cut interest rates to revive growth. The monthly inflation, based on wholesale price index (WPI), was 9.51 percent during the corresponding month of the previous year.

Government data released recently, however, showed food inflation surged to double-digits. Food inflation rose to 10.81 percent in June. It had grown by 10.74 percent in May as compared to 8.25 percent in the previous month as vegetables, pulses, milk, eggs, meat and fish became costlier.

Food inflation re-entered the double-digit zone after a gap of six months in April, and the trend continued in June. The prices of vegetables surged by a whopping 48.84 percent year-on-year. Potato prices zoomed by 75.85 percent.

Pulses became costlier by 20.48 percent. Milk became costlier by 7.30 percent. The prices of eggs, meat and fish rose by 16.25 percent.

The prices of manufactured products increased by five percent year-on-year. The inflation of manufactured products stood at 5.02 percent, while price of fuel and power grew by 10.27 percent. It was 11.53 percent in May. Petrol prices went up by 13.11 percent.

Petrol prices remained high even after the three state-owned oil marketing companies had cut prices by INR2 per litre on June 2 due to falling global crude prices. The partial roll-back that came 10 days after the companies had hiked petrol prices by over INR7 per litre, the steepest such hike in recent times.

However, petrol as an item has lower weightage in the WPI of about 1.09 basis points and does not primarily impact the headline inflation.

Diesel, on the other hand, has a higher weightage in the WPI of about 50-75 basis points due to larger usage in the transportation sector. High-speed diesel prices went up by 6.81 percent.

The data showed that India continued to face the problem of high inflationary pressure and a slow rate of growth.

As per the data released by the Central Statistics Office recently, India's industrial output grew by 2.4 percent in May, led by a rebound in manufacturing and electricity production. The growth was a marginal 0.1 percent in April due to poor show of mining and manufacturing sectors.

The cumulative growth in the factory output in April-May period, measured in terms of the Index of Industrial Production (IIP), stands at 0.8 percent year-on-year. The IIP had declined by 3.5 percent in industrial production in March, the first such contraction in factory output since October 2011, when it shrank by 4.7 percent.