Inflation rises to 4.86% in June, onion prices shoot up by 114%
New Delhi: Snapping declining trend of four months, inflation rose to 4.86 percent in June as kitchen items like onion, rice and other cereals became costlier, adding to the woes of the government struggling to arrest the falling value of rupee that is putting pressure on prices.
Rising inflation will also have a bearing on the Reserve Bank's first quarter monetary policy review on July 30.
Inflation based on the Wholesale Price Index (WPI) had stood at 4.70 percent in May.
Food inflation rose to 9.74 percent, driven by price rise in onion, cereals and rice in June, against 8.25 percent in the previous month, as per the Industry Ministry data.
Vegetable prices went up by 16.47 percent from 4.85 percent in May. Inflation in onion shot up by 114 percent in June as against 97.40 percent in May.
Inflation in the manufactured items category, however, declined to 2.75 percent in June from 3.11 percent in May.
Chairman of Prime Minister's Economic Advisory Council C Rangarajan expressed apprehension that rupee depreciation could have bearing on the price situation.
"Even though inflation has risen a little bit, WPI seems to be stablising...(but) going ahead there will be impact of rupee depreciation (on prices)," he said.
On the possibility of interest rate cut by RBI in its forthcoming policy, Rangarajan said: "RBI faces the difficult choice of controlling inflation, growth needs stimulus, but external situation remains a concern. RBI will take all these three factors into account."
The value of the rupee, which touched all time low of 61.21 to a dollar earlier this month, is fuelling inflation, especially in the prices of petroleum products. Government as well as the RBI have been taking steps to strengthen rupee.
The Consumer Price Index (CPI) based retail inflation for June too had also inched up marginally.
As per the WPI data, non-food articles category which includes fibre, oil seeds and minerals, saw a sharp rise in inflation to 7.57 percent, from 4.88 percent in May.
Meanwhile, inflation for April has been revised downwards to 4.77 percent from 4.89 percent.
Inflation in egg, meat and fish was 12.23 percent during June as compared to 11.21 percent in May. Price rise in cereals and rice was high at 17.18 and 19.11 percent.
Potatoes, however, saw decline in rate of price rise to (-)14.22 percent, from (-)3.44 percent in May. Pulses too declined sharply to 1.59 percent during June, from 5.95 percent in May.
Rupa Rege Nitsure, chief economist of Bank of Baroda opined that the June WPI does not appropriately factor in the impact of recent adjustments in administered fuel prices and rupee depreciation. "There will be an upward revision in this number, going forward," she added.
For the fuel and power basket, inflation was lower at 7.12 percent in June as compared to 7.32 percent in May.
Ficci President Naina Lal Kidwai said the industry body will like to reiterate the need to gear up steps to address supply side bottlenecks.
"There is an urgent need to enhance public investment in agriculture as against subsidies and step up agriculture productivity" she added.
Another leading business chamber Assocham said that both the government and the RBI need to focus on boosting economic growth as it is the only sound solution.
"The need of the hour is to boost investor sentiment. The upercentoming quarterly monetary assessment must take this necessity into account," it said.