India wholesale prices drop

MUMBAI, July 14

India’s wholesale inflation rate fell for an eighth consecutive month in June, government data showed today, pulled down by weak global oil prices and above average early monsoon rains.

Inflation based on the Wholesale Price Index (WPI), an indicator which measures biggest basket of goods, slid 2.40 per cent last month from a year earlier, the statistics ministry said.

Economists surveyed by Bloomberg had estimated that WPI would slump 2.30 per cent after a 2.36 per cent fall in May.

“Crude oil has been weak for a while now and has helped tame inflationary expectations,” Ashutosh Datar, an economist at IIFL Institutional Equities brokerage, said.

Reserve Bank of India Governor Raghuram Rajan has made controlling inflation a target and has been aided by the tumble in world oil prices over the past year, with Consumer Price Inflation (CPI) remaining consistently below six per cent.

He has cut interest rates by 75 basis points in 2015 in a bid to inject life into the economy but is expected to wait until end of monsoon in September before deciding whether to move again.

India relies on a strong monsoon for its farmers to produce a healthy crop yield and small fluctuations in food prices can adversely affect millions living in poverty.

Weak rains can force inflation up but India witnessed a good start to the monsoon with heavy rains in late June, which are believed to have contributed to slide in WPI.