India's wholesale price index increased by 5.77 percent on the year in June, up from 4.43 percent in May and well above the consensus forecast of 4.93 percent. The index advanced 1.10 percent on the month, after an increase of 0.94 percent previously. Today's data follows the release last week of CPI data showing a third consecutive increase in consumer inflation from 4.87 percent in May to 5.0 percent in June, further above the mid-point of the Reserve Bank of India's target range of 2.0 percent to 6.0 percent.
The increase in WPI inflation in June was broad-based, with stronger price gains for all major categories. Food prices, which account for around 15 percent of the index, advanced by 1.80 percent on the year in June, up from 1.60 percent in May, with vegetable prices increasing by 8.12 percent on the year after rising 2.51 percent previously. The year-on-year increase in fuel and power prices (around 13 percent of the index) picked up from 11.22 percent in May to 16.18 percent in June, while inflation for manufactured products (around 64 percent of the total index) increased from 3.73 percent to 4.17 percent.
At their latest policy review, held early June, the RBI's Monetary Policy Committee increased policy rates and revised up their near-term consumer inflation forecasts in response to the pick-up in underlying price pressures seen in recent months. Headline CPI inflation is now forecast to be 4.8 percent to 4.9 percent in the first half of the new fiscal year, compared with a previous forecast of between 4.7 percent and 5.1 percent, and to fall to 4.7 percent in the second half, compared with the previous forecast of 4.4 percent.
At last month's meeting officials also noted several risks to the inflation forecast that could prompt further upward revisions to these forecasts in coming months, while stressing again their determination to keep inflation close to 4.0 percent. The further increase in both CPI and WPI inflation in June suggests additional rate increases may be considered in order to help bring headline inflation back toward this level, despite the release of data last week showing weaker industrial production growth in June. The next policy review is scheduled for early August.