INFLATION DIPS TO 4 MONTH LOW

Inflation receded to four-month low of 5.43 per cent in June, although bleak situation of the South-West monsoon continues to remain a cause for concern. The Wholesale Price Index based inflation declined in June after touching 5-month high of 6.01 per cent in May. It was 5.16 per cent in June 2013. "The data has been positive due to favourable statistical base... The news on the monsoon and kharif sowing is not encouraging. It is more deficient in western India which is less irrigated. So it doesn't augur well for the RBI to cut rates going forward," Chief Economist, Bank of Baroda, Rupa Rege-Nitsure said. WPI inflation in June eased mainly on fall in vegetable, fuel, edible oil, sugar and onion prices. However, the kitchen staple, potato, went up by 45.52 per cent. Prices of vegetables during the month declined by 5.89 per cent from May, edible oils - 0.75 per cent, sugar - 2.09 per cent. Onion prices were down by 10.7 per cent. In the past few months, however, the prices of onion and potato had been going up. The government has taken various steps including imposing minimum export price of USD 500 a tonne on onion and USD 450 tonne on potatoes to improve domestic supply. It has also put a stock holding limit on these items and has decided to release 50 lakh tonne of rice in open market to prevent price rise due to poor monsoon. "The moderation in inflation together with the rebound in industrial production as per the recently released data, provides a positive signal that the structural bottlenecks afflicting the economy could be gradually showing signs of receding and green shoots of recovery could be around the corner," industry body CII said in a statement. Among others items that became expensive in June include include fruits (up 21.40 per cent), milk (10.82 per cent), egg, meat and fish (10.27 per cent) and rice (10.24 per cent). Food inflation in June was down at 8.14 per cent from 9.5 per cent in May. However, it is likely to remain a cause for concern for the government given the patchy monsoon so far. Inflation in the fuel and power category, meanwhile, was down at 9.04 per cent from the previous month.

Among other items that witnessed fall in prices in June include cereals at 5.33 per cent. But, prices of pulses became expensive at 1.78 per cent, according to an official release. In the non-food articles category, the rate of price rise during the month was slower at 3.49 per cent. Among others, prices of fuel and power grew at a slower pace of 9.04 per cent, as against 10.53 per cent in May. Beverages, tobacco & tobacco products prices rose to 8.64 per cent, from 8.45 per cent. Prices of aerated drinks and tobacco products have gone up. In other items in the manufactured category, cotton textiles price rose to 8.31 per cent, though the rate of price rise for man-made textiles was slower at 5.54 per cent. The prices of cement and lime declined at 4.45 per cent and for basic metals alloys and metal product inflation was down at 2.83 per cent. Industry body Assocham said: "When potatoes and tomatoes grab headlines, they limit the policy space both with the Reserve Bank and the government to really go for bold measures. So, very effective and quick central intervention is required with the help of the states to tame the prices of essential commodities whatever it takes, or else bold reforms will remain non-starters." The WPI inflation for April was revised upwards at 5.55 per cent, from 5.20 per cent provisionally.