The rate of wholesale food inflation fell for the second consecutive week to 12.63 per cent for the week ended June 26, primarily due to decline in prices of fruits ,vegetables and pulses. However, fuel inflation surged to 18.02 per cent during the week from 12.9 per cent in the previous week.
Wholesale food inflation, as measured by the Wholesale Price Index (WPI), which had been consistently hovering at around 16 per cent for the past 2 months, had slipped to 12.92 per cent for the week ended June 19, primarily due to statistically high base effect and deceleration in rise of the prices of foodgrain like cereals and pulses.
Vegetable prices fell by over 4 per cent from last year, led by a massive decline in rates of potato and onion. Potato became cheaper by over 42 per cent, while onion by 8.75 per cent on an annual basis. Prices of petrol and diesel had been raised by up to Rs 3.50 a litre, while those of LPG and kerosene had been raised by Rs 35 a cylinder and Rs 3 a litre, respectively.
The inflation rate is expected to rise further, given the increase in fuel prices would push the prices of food and manufactured products up. Following the decision on fuel prices, the Reserve Bank of India (RBI) lifted its key rates earlier than expected by 25 basis points, the third increase so far this year. The markets have factored in another 25-basis-point increase in the monetary policy review to be held on July 27.
“When the full pass-through of the rise comes, there will be an impact on the prices of commodities,” N R Bhanumurthy, an economist with New Delhi-based think tank National Institute of Public Finance and Policy said.
"I would expect another 25-basis-point increase in the July 27 review and after that one more round of off-cycle rise.”