NEW DELHI: Easing prices of manufactured goods pulled down the inflation marginally to 7.25 per cent in June, but concerns over high food prices may dissuade Reserve Bank to cut interest rates in its monetary policy due later in the month.
Inflation, as measured by the Wholesale Price Index (WPI), was 7.55 per cent in May. In June last year, it was 9.51 per cent.
Overall food inflation rose to 10.81 per cent in June, from 10.74 per cent in May. In June last year, inflation rate in this category was 7.6 per cent. Food articles have 14.3 per cent share in the WPI basket.
Terming the rate of price rise as "a matter of concern", Planning Commission Deputy Chairman Mr Montek Singh Ahluwalia said "inflation is high mainly because of food and non-core elements. We hope that we will be able to bring it down...still a problem."
Inflation is above the budget forecast. Finance Ministry’s projection is that it might go down to 7 per cent in few months, he said, adding, "slowing down is reflective of that which is good".
However, experts feel that June’s high inflation number may not prompt RBI to cut interest rate even though India Inc has been pressing for easing of rates to prop up growth.
"RBI may not ease interest rate going by the number released today," Crisil Chief Economist Mr D K Joshi said.
However, Department of Economic Affairs Secretary Mr R Gopalan said "fall in inflation will be a significant input for RBI to take view on monetary policy".
According to Minister of State for Finance, Mr Namo Narain Meena, availability of food articles is expected to increase, which will address supply constraints.
Indications from IMD are still positive on rainfall improving. Monsoon deficit in last 2 weeks has come down.
"We are hopeful that this declining trend will continue," Mr Meena added.
According to CII Director General Mr Chandrajit Banerjee, since manufacturing inflation remained stable and inflation is on the declining trend since last year, the RBI should cut interest rates in its forthcoming monetary policy review.
This in turn would "prop up industrial growth and revive the virtuous cycle of growth and spruce up business sentiments," he said.
ICRA senior economist Ms Aditi Nayar said inflation concerns persist on account of the recent rise in the price of the Indian crude oil basket and the weaker-than-normal progress of the monsoon.
"Accordingly, we expect that the RBI may retain the policy rate in the upcoming policy review," Ms Nayar added.
In the manufactured items category, prices of cotton textile, rubber and plastic products and iron and machinery eased a little on year-on-year basis.
The rate of price rise in the manufactured products stood at 5 per cent in June as against 7.9 per cent in the same month last year. It was 5.02 per cent in May this year.
In food articles category, rice turned expensive by 6.70 per cent, wheat 7.46 per cent, pulses 6.82 per cent and vegetables by 20.48 in June on an annual basis.
On month-on-month basis, poultry chicken prices were up by 7 per cent, gram 6 per cent, masur 4 per cent, and fruits & vegetables, egg, arhar, rice by 2 per cent each. Tea, milk, wheat and mutton were up 1 per cent each.
Meanwhile, inflation for April has been revised upwards to 7.50 per cent, from the provisional estimate of 7.23 per cent.