Impact of US-Iran Conflict: WPI Inflation Climbs to 9.87% as Food Prices Surge
India’s wholesale price inflation rose to 9.87% in June, up from 9.68% in May. This increase is attributed to significant price hikes in both food and non-food items, influenced by the ongoing US-Iran conflict. The situation has been exacerbated by the blockade of the Strait of Hormuz, a crucial route for India’s crude oil imports, which has also impacted food prices.
WPI Data
The Ministry of Commerce and Industry reported that key contributors to the Wholesale Price Index (WPI) inflation in June included mineral oils, food articles, basic metals, and chemicals. The WPI is calculated using 2022-23 as the base year. In June, inflation in the fuel and power category decreased to 27.41% from 30.33% in May. Food articles saw a rise in wholesale inflation to 5.49%, up from 3.60% the previous month. Non-food articles recorded inflation at 11.07%, while minerals registered 9.45%. Inflation for manufactured products remained steady at 7.48%.
CPI At 17-Month High
Retail inflation, as measured by the Consumer Price Index (CPI), surged to a 17-month high of 4.38% in June, compared to 3.93% in May. The Reserve Bank of India (RBI) aims to maintain headline inflation at 4%, with a tolerance band of 2 percentage points. Last month, the RBI raised its inflation forecast for the current financial year to 5.1% from 4.6%, citing rising input costs driven by higher global energy prices. This increase was largely due to escalating food inflation and government-initiated fuel price hikes in late May, linked to the ongoing conflict in West Asia.
Data from the National Statistical Office (NSO) indicated that food inflation climbed to 5.3% in June from 4.8% in May. A deficient monsoon is expected to further pressure food prices in the coming months. The “restaurants and accommodation services” category also saw inflation rise to 6.9% in June, reflecting increased commercial cooking gas prices and rising food costs in eateries. June marked the first time retail inflation exceeded 4% under the revised CPI series, which uses 2024 as the base year.
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