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New Delhi: India's
headline inflation fell to a five-month low of 7.25 percent in
June as compared to 7.55 percent in the previous month, but
general food prices remained stubbornly high, giving little relief
to the common people and economic policy makers, the government
data showed Monday.
With food prices pushing up and overall inflation remaining much
above the comfort zone, the Reserve Bank of India is unlikely to
cut interest rates when it reviews the monetary policy at the end
of this month.
The monthly inflation, based on wholesale price index (WPI),
revised upward to 7.50 percent for April from 7.23 percent
reported earlier, according to data released by the ministry of
commerce and industry.
The WPI based inflation was 9.51 percent in June 2011.
Although there is some softening in overall inflation, stubbornly
high food prices remain a big concern for the policy makers. Food
inflation rose to 10.81 percent in June as compared to 10.74
percent in the previous month as vegetables, pulses, milk, eggs,
meat and fish became costlier.
Reacting on the monthly data, Deputy Chairman of Planning
Commission Montek Singh Ahluwalia said inflation remained a big
concern.
"It has eased a little bit, but the whole inflation scenario is
still a matter of concern," Ahluwalia told reporters.
Ahluwalia expressed hope that the government will be able to curb
inflation in the near future.
Food inflation re-entered the double-digit zone after a gap of six
months in April 2012 and the trend continued in June. 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. Prices of eggs, meat and fish rose 16.25 percent.
Prices of manufactured products increased by 5 percent
year-on-year. The inflation of manufactured products stood at 5.02
percent, while price of fuel and power grew by 10.27. It was 11.53
percent in May. Petrol prices went up by 13.11 percent.
C. Rangarajan, chairman of the Prime Minister's economic advisory
council, said food prices in the coming month would depend on the
progress of monsoon rains, which would impact the overall
inflation scenario.
Rangarajan said there would be some moderation of fuel inflation
in the coming months on the back of easing in crude oil prices in
the international markets.
"One can expect some moderation in fuel inflation, though it is
difficult to predict," he said.
The recent 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 last
week, India's industrial output grew by 2.4 percent in May led by
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.
Anis Chakravarty, a senior director at Deloitte in India, said
inflation would remain "sticky" till the third quarter of the
current financial year.
"It is also important to note that while these are provisional
numbers, we are seeing upward revisions now on a more consistent
basis when the final index is released," Chakravarty said.
"One hopes that the final numbers do not cross the 7.5 percent
level after recent price hikes are factored in. Future inflation
trajectory should depend on the impending diesel price hike and
whether food inflation holds as the monsoon advance," he said.
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