In what will increase the clamour for a rate cut, wholesale price index (WPI)-based inflation eased sharply to its lowest level this year to 0.9 per cent in June from 2.17 per cent in May.
WPI inflation had contracted by 0.9 per cent in June last year.
Prices of potatoes, pulses, wheat and vegetables contracted sharply in June.
Inflation in fuel and power and manufactured groups also eased during the month. The fuel and power segment saw some cooling of inflation at 5.28 per cent, from 11.69 per cent in May. Manufactured products inflation read 2.27 per cent.
Official data released on Friday showed that the WPI Food Index dipped by 1.25 per cent in June from 0.15 per cent in May.
The data comes soon after the retail inflation in June was found at a record low of 1.54 per cent. Chief Economic Adviser to the Finance Ministry Arvind Subramanian had seemingly pitched for lower rates, noting the “paradigm shift” in inflation trajectory that has been “missed by all”.
Analysts also said the Monetary Policy Committee in its next meeting could lower rates.
“The decline in the WPI inflation in June 2017 reinforces our expectation that the MPC will reduce the repo rate by 25 bps in their August 2017 meeting, in a split vote,” said Aditi Nayar, Principal Economist, ICRA.
PTI adds: The government data released today showed that prices of food articles contracted by 3.47 per cent in June on a yearly basis. Vegetable inflation stood at (—) 21.16 per cent.
Potato saw a maximum deflation of 47.32 per cent, followed by pulses at 25.47 per cent. For onion, deflation was 9.47 per cent in June.
The rate of price increase was 1.93 per cent in cereals, while that of protein-rich items such as eggs, meat and fish was 1.92 per cent in June.
The fuel and power segment saw some cooling of inflation at 5.28 per cent, from 11.69 per cent in May. Manufactured product inflation read 2.27 per cent.
Besides, industrial production data showed that the growth in factory output slumped to 1.7 per cent in May, from 8 per cent a year ago.
WPI inflation is calculated on the basis of 2011-12 as the base year. It was revised in May from 2004-05 with the aim to reflect the macroeconomic picture more accurately.
The index basket of the new series has a total of 697 items, including 117 for primary articles, 16 for fuel and power and 564 for manufactured products.
The final print of the April WPI inflation remained unchanged at 3.85 per cent.