NEW DELHI: India’s wholesale price index-based inflation contracted for the third consecutive month in June as crude oil price fell drastically while manufacturers lost pricing power as consumer demand waned due to the unfolding coronavirus pandemic.
Data released by the industry department showed wholesale price index (WPI) inflation contracted 1.81% in June against 3.21% contraction in May. During the month, crude oil prices softened 41.4% compared to the same month in the previous year, while fuel prices eased 13.6% from their year ago levels.
Ten out of the 17 categories of manufactured products listed in WPI, including textiles, leather, wood, chemical, and basic metals saw contraction in prices as both demand and supply remained constrained due to coronavirus related issues.
Wholesale food inflation, however, picked up marginally in June to 2% from 1.1% in the preceding month.
Retail price inflation released on Monday showed food inflation eased to a nine- month low 7.87% in June, while headline retail inflation at 6.09%, released after a gap of two months, came surprisingly higher than the pre-coronavirus print of 5.84% for March.
While retail inflation remains elevated above the upper limit of the tolerance level of the central bank, most analysts believe the Reserve bank of India may continue to prioritise growth over inflation in the medium term and may further cut policy rates in its monetary policy committee (MPC) meeting next month. The MPC has cut policy rate cumulatively by 135 basis points between February 2019 and the onset of the pandemic.