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Expansion
The fall in the prices of cereals, wheat, onion, petrol, electricity and minerals has brought relief on the wholesale inflation front in June 2022. With this, the trend of increasing wholesale price index (WPI) based inflation for the last three months stopped in June. Yet it has remained above 10 per cent for the 15th consecutive month since April 2021.
According to the data released by the government on Thursday, even though there has been a sharp correction in the prices of minerals and basic metals on a monthly basis, the prices of food articles have remained up. Inflation in food articles rose to 14.39 per cent in June, from 12.34 per cent in May 2022. Rating agency Icra says that fears of a slowdown in the global market and softening of commodity prices have made minerals and basic metals cheaper. This has given relief on the wholesale inflation front. However, WPI inflation continues to remain high due to higher prices of fruits, vegetables and potatoes.
Retail inflation will be 5% by March
SBI’s ever-increasing retail inflation may come down by 2 per cent to 5 per cent by March next year. In June 2022, it came down marginally to 7.01 per cent. SBI said in the report that the retail inflation rate in the country has been above 6 percent for the sixth consecutive month. However, in the last two months, the steps taken by the government and the RBI have brought relief on the inflation front. These steps include reduction in excise duty on petrol and diesel, restrictions on food exports.
- Improvement in monsoon and improvement in supply side may provide relief from inflation in the times to come.
- SBI said that at present there is only 20 to 30 percent chance of a global recession. The main reason for this is rising inflation and aggressively increasing interest rates. The economy may remain at stagnation for a long time.
Coal prices will remain high in the current quarter as well
ICRA said on Thursday that domestic coal prices are likely to remain high in the current quarter in view of the difficulties in supply of coal during monsoon. In May, the premium on e-auction of coal domestically increased by more than 400 per cent. This had an adverse impact on the cost structure and margins of the parent metal companies.
Relief in July…
ICRA Chief Economist Aditi Nair said global commodity and fuel prices are moderating. At the domestic level also, the prices of food items are gradually coming down. Its impact will be more visible on the wholesale inflation data for July coming next month. It is expected that wholesale inflation will come down to 13 per cent in July.
These products are cheap
Items May June
Minerals 33.94% 8.55%
Cereals 8.01% 7.99%
Wheat 10.55% 10.34%
Onion -20.40% -31.54%
Meat, fish 7.78% 7.24%
Made Fabric 4.79% 3.90%
fuel-electricity 40.62% 40.38%
Petrol 58.78% 57.82%
Manufactured 10.11% 9.19%
inflation hit them
Product May June
Vegetable 56.36% 56.75%
Potatoes 24.83% 39.38%
Fruit 9.98% 20.33%
Lentils -3.69% -2.82%
Milk 5.81% 6.35%
LPG 47.71% 53.20%
Leather 1.84% 4.08%
Chemistry 13.94% 14.96%
Pharma 1.83% 3.86%