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WPI inflation slows to two-year low on price fall in fuel and power, manufactured items

WPI inflation was 2.76 per cent in January 2019, while it was more than double 5.68 per cent in June 2018.

The wholesale price index (WPI)-based inflation, slowed to a little over two per cent in June 2019 a two-year low, according to data shared by the government. This comes even as retail inflation, calculated on the basis of consumer price index (CPI), continuing to creep higher to 3.18 per cent.

The annual rate of inflation, based on monthly WPI, stood at 2.02 per cent in June compared to 2.45 per cent in May, as per provisional data released by Commerce Ministry Monday. WPI inflation was 2.76 per cent in January 2019, while it was more than double 5.68 per cent in June 2018.

The decline comes on the back of reduced inflation in prices of manufactured products, accounting for 64.23 per cent of the index, as well as a drop in prices of fuel and power sources, accounting for 13.15 per cent of the index. Continued decline in the index of potatoes and prices of goods like crude petroleum have also contributed to the lower rate of inflation of the overall index. The WPI inflation for April has also been revised to 3.24 per cent from the provisional 3.07 per cent reported by Commerce Ministry in May.

The sustained decline in the wholesale inflation can partly be ascribed to the high base effect along with persistent moderation in fuel and power (that slipped into deflation in June 19) and manufactured products, which fell to a 34 month low levels, ratings agency CARE Ratings said in a release analysing the latest data.

However, it expects wholesale inflation to move upwards in the coming months. In the upcoming months, the subdued prices in fuel and power and manufacturing could aid in lowering inflationary pressures on the wholesale levels. However, the upside could come from uncertain monsoon exerting pressure on the food prices, the agency said.

The hike in cess on petrol and diesel by the central government might also put upward pressure on the fuel prices domestically though the lower crude oil prices in the global markets could keep the inflation in check, CARE said.