WPI rises 4.43% in May, highest in 14 months

Are bound in food inflation and a jump in fuel prices in May led to the wholesale inflation rate rising to 4.43 percent from 3.18 percent in April, its fastest up tick in 14 months. Figures released by the commerce ministry showed that the rate in the Wholesale Price Index was led by double-digit increase in petrol prices, while food prices rose by 1.6 percent after low growth for the past three months.

Arebound in food inflation and a jump in fuel prices in May led to wholesale inflation in the country rising to 4.43 per cent, from 3.18 per cent in April, its fastest uptick in 14 months.

Figures released by the commerce ministry on Thursday showed that rising inflation in the wholesale price index (WPI) was mainly led by double-digit inflation in petrol prices, while food prices rose by 1.6 per cent after low growth or deflation for the last three months.

Pressure on inflation as a whole is mounting. On the other hand, retail inflation — measured by the widely tracked consumer price index (CPI)— had jumped to a four-month high of 4.87 per cent in May. “Perhaps anticipating this trend in core inflation, the Reserve Bank of India (RBI) did not wait till August and went for a 25-basis point (bps) rate hike in the June review of the 2018-19 monetary policy. We expect one more rate hike by the RBI during the current fiscal,” Sunil Kumar Sinha, principal economist at India Ratings and Research, said.

Wholesale inflation had been on a downward curve since November, closely imitating food inflation which had crashed over the period. But the price rise in the food segment accelerated in May, with food inflation at 1.6 per cent, up from 0.87 per cent in April.

Reports of farm distress and subsequent protests by farmers in Madhya Pradesh and Maharashtra, among other places, had pointed out acute loss in farm income due to continuing drop in food prices across the country.

The WPI is more relevant than the CPI in gauging farmers’ distress, though it also has its own inadequacies because there are middlemen between farmers and the mandis. So, Thursday’s figures are set to come as a relief for farmers across the country.

After two straight months of price fall, vegetable prices rose by 2.31 per cent in May. The same was true for wheat, which saw inflation of 3.05 per cent after sustained deflation for more than six months. Potato prices rose by 81.93 per cent in May, up from the 67.94 per cent rise in April. This continued the five-month long trend whereby the wholesale prices of the tuber have skyrocketed.

But prices of milk and fruits rose at a slower pace in May than the month before. Also, prices of pulses continued to remain deflationary.

Inflation in the energy category rose sharply to 11.22 per cent in May, up from the 7.85 per cent in the previous month. This was mostly due to the rising cost of petrol. Petrol prices rose by 13.90 per cent, up from the 9.45 per cent in the previous month. Prices of high-speed diesel also continued to rise at a fast clip, with inflation accelerating to 17.34 per cent, up from 13.01 per cent in April, when it had risen by more than double the previous rate.

However, liquefied petroleum gas prices continued to drop for the third straight month, although the rate of deflation reduced sharply to 0.74 per cent, down from 11 per cent in the previous month.

Inflation in manufactured products stood at 3.73 per cent, slightly higher than the 3.11 per cent in April.