The decline in the inflation rate in June is primarily due to a fall in prices of mineral oils, food products
| Photo Credit: Reuters

India’s wholesale prices remained in deflationary territory for the third successive month in June, with the pace of price contraction from a year ago quickening to -4.12% from -3.48% in May.

This is the sharpest contraction in wholesale prices in about eight years, and was largely aided by the base effects from last June when wholesale price inflation was 16.2%, and some deceleration in commodity prices.

Some food items such as milk, cereals, pulses and wheat, reported high inflation rates in the range of 8%-9%. Vegetables reported 22% deflation year-on-year, but prices were up 13.2% in June, when compared to May.

While fuel and power inflation rate skidded to -12.6% in June from -9.2% in May, the dip in prices in other categories was milder, with the Food Index down just 1.2% compared to -1.6% in May. Sequentially, however, wholesale food prices were up 1.4% from May.

Deflation in primary articles’ prices moved to -2.9% from -1.8% in May, but their prices inched up 0.6% from May. Manufactured products’ prices fell 2.7% from last June and 0.5% from May 2023 levels.

The Commerce and Industry Ministry said the decline in the inflation rate in June is primarily due to a fall in prices of mineral oils, food products, basic metals, crude petroleum & natural gas and textiles. The ministry also revised upward the inflation rate for April 2023 to -0.79% from -0.90% estimated earlier.

Rating firm ICRA reckoned that the deflation in the WPI will ease to 2%-2.5% in July with global commodity prices seeing a sequential rise of 1.2% so far this month. The surge in prices of vegetables, with a “moderate hardening in cereals and pulses” due to supply disruptions amid excess rainfall, along with the lag in sowing of major crops and the onset of El Nino conditions impart uncertainty to the food inflation outlook, it noted.

“The moderation in food inflation in year-on-year terms masks the sequential price rise: The month-on-month increase in food prices was similar to that seen in retail inflation data for June,” said a research note by Barclays’ analysts, which said food prices surged across the board in June, except in the case of fruits and oilseeds.

The gap between retail inflation, which hit a three-month high of 4.8% in June, and wholesale inflation has now widened to 893 basis points, the highest since June 2022, and economists expect the deflation in wholesale prices to help moderate retail prices with a lag.

One basis point equals 0.01%.

Labourers loading wheat at APMC wholesale market outskirts of Ahmedabad on May 17, 2022. 
| Photo Credit: Vijay Soneji

The Centre has amended its wheat export ban order of May 13 to allow export consignments that were registered in the Customs Department’s systems and handed over for examination on or prior to May 13 to be shipped out, the Commerce and Industry Ministry said on Tuesday.

The government also allowed shipment of a wheat consignment headed for Egypt, which was already under loading at the Kandla port, following a request by the Egyptian Government. A bulk of the 61,500 metric tonne wheat consignment had already been loaded for shipping to Egypt. The Centre has now permitted the exporter to load the remaining 17,160 metric tonnes so that the full consignment can sail out from Kandla.

Reiterating the intent behind last week’s ban order, the ministry said the decision would ensure food security and rein in inflation, while maintaining India’s reliability as a supplier as it would help other countries facing food deficits. The order also aimed to provide a clear direction to the wheat market to prevent hoarding of wheat supplies, the ministry asserted.

The export curbs notified last week came within a couple of days of the ministry’s announcement that official delegations would travel to several countries to pitch Indian wheat exports.

The curbs would not apply in cases where prior commitments had been made by private trade through Letters of Credit as well as in situations where permission is granted by the Centre following requests made by the governments of other countries to meet their food security needs.