Snapping declining trend of four months,inflation rose to 4.86 per cent in June as kitchen items like onion,rice and other cereals became costlier,adding to the woes of the government struggling to arrest the falling value of rupee that is putting pressure on prices. Rising inflation will also have a bearing on the Reserve Bank’s first quarter monetary policy review on July 30. Inflation based on the Wholesale Price Index (WPI) had stood at 4.70 per cent in May.
Food inflation rose to 9.74 per cent,driven by price rise in onion,cereals and rice in June,against 8.25 per cent in the previous month,as per the Industry Ministry data. Vegetable prices went up by 16.47 per cent from 4.85 per cent in May. Inflation in onion shot up by 114 per cent in June as against 97.40 per cent in May. Inflation in the manufactured items category,however,declined to 2.75 per cent in June from 3.11 per cent in May. Chairman of Prime Minister’s Economic Advisory Council C Rangarajan expressed apprehension that rupee depreciation could have bearing the price situation.”Even though inflation has risen a little bit,WPI seems to be establishing…(but) going ahead there will be impact of rupee depreciation (on prices),” he said.
On the possibility of interest rate cut by RBI in its forthcoming policy,Rangarajan said: “RBI faces the difficult choice of controlling inflation,growth needs stimulus,but external situation remains a concern. RBI will take all these three factors into account. The value of the rupee,which touched all time low of 61.21 to a dollar earlier this month,is fueling inflation,especially in the prices of petroleum products. Government as well as the RBI have been taking steps to strengthen rupee. The Consumer Price Index (CPI) based retail inflation for June too had also inched up marginally.