WPI IN­FLA­TION AT 6-MONTH HIGH OF 3.59%

Faster rises in prices of food and fuel prod­ucts, pushed the in­dex up

Financial Chronicle - - FRONT PAGE -

In­dia’s whole­sale price-based in­fla­tion surged 3.59 per cent in Oc­to­ber, the high­est in the past six months, on ac­count of costlier food and fuel. This, com­pared to 1.27 per cent in Oc­to­ber last year and even 2.60 per cent in Septem­ber, may put the gov­ern­ment in the fire fight­ing mode as it will never al­low the in­fla­tion to reach a level, which may de­flate its claim of suc­cess on price rise. Fi­nance min­is­ter Arun Jait­ley had said on Mon­day that GST has brought down in­fla­tion. “This ac­tu­ally re­duces in­fla­tion. This is one of the ad­van­tages of a more ef­fi­cient tax sys­tem... Ef­fec­tively, today, al­most all items in the goods cat­e­gory are bet­ter off than they were prior to July 1,” he had said.

IN­DIA’S whole­sale price-based in­fla­tion surged 3.59 per cent in Oc­to­ber, the high­est in 6 months, on ac­count of costlier food and fuel. This, com­pared with 1.27 per cent in Oc­to­ber last year and even 2.6 per cent in Septem­ber, may put the gov­ern­ment in the fire-fight­ing mode as it will never al­low the in­fla­tion to reach a level, which may de­flate its claim of suc­cess on price rise.

Fi­nance min­is­ter Arun Jait­ley had said on Mon­day GST has brought down in­fla­tion. “This ac­tu­ally re­duces in­fla­tion. This is one of the ad­van­tages of a more ef­fi­cient tax sys­tem. Ef­fec­tively, today, al­most all items in the goods cat­e­gory are bet­ter off than they were prior to July 1,” he said on Novem­ber 13.

The pre­vi­ous high in Whole­sale Price In­dex (WPI) was seen in April when it in­creased 3.85 per cent. The eco­nomic af­fairs sec­re­tary SC Garg said, “Hope­fully, the in­creas­ing trend proves to be sea­sonal and we will con­tinue to have sub-4 per cent in­fla­tion.”

The spike in WPI in­fla­tion was broad-based, led by veg­eta­bles, fruit, crude oil, nat­u­ral gas, fu­els, min­er­als and elec­tric­ity, said Aditi Na­yar, prin­ci­pal econ­o­mist at Icra, a rat­ing agency.

Ac­cord­ing to gov­ern­ment data re­leased on Tues­day, in­fla­tion in food ar­ti­cles more than dou­bled to 4.30 per cent in Oc­to­ber. Onions sky­rock­eted 127.04 per cent, while veg­eta­bles 36.61 per cent. In the eggs, meat and fish seg­ment, the rate of price rise was 5.76 per cent.

In­fla­tion is not a ma­jor worry at this junc­ture as the gov­ern­ment is mak­ing ef­forts for the smooth sup­ply of food ar­ti­cles, said Anil Khai­tan, pres­i­dent of PHDCCI. “We have bumper kharif crops and the con­straints in the per­ish­ables are tem­po­rary,” he said.

Last month, the Re­serve Bank of In­dia (RBI) kept bench­mark in­ter­est rate un­changed on fears of ris­ing in­fla­tion while low­er­ing growth fore­cast to 6.7 per cent for the cur­rent fis­cal. RBI also raised its in­fla­tion fore­cast to the 4.2-4.6 per cent range for the rest of the cur­rent fi­nan­cial year against 4-4.5 per cent pre­vi­ously.

RBI is sched­uled to come out with its next mone­tary pol­icy re­view on De­cem­ber 6. “The sharper-thanan­tic­i­pated up-tick in WPI in­fla­tion re­in­forces our ex­pec­ta­tion of a sta­tus quo in the up­com­ing mone­tary pol­icy re­view,” Icra’s Na­yar said.

In­fla­tion in man­u­fac­tured prod­ucts saw a slight dip to 2.62 per cent, as against 2.72 per cent in Septem­ber. In the fuel and power seg­ment, it rose 10.52 per cent, as against 9.01 per cent in Septem­ber. Fuel in­fla­tion has re­mained high for the past 3 months as petrol and diesel prices con­tin­ued to rule high, track­ing global crude rates. Power tar­iffs shot through the roof on lower do­mes­tic pro­duc­tion.

Pulses con­tin­ued to wit­ness de­fla­tion at 31.05 per cent. Like­wise, in potato de­fla­tion was at 44.29 per cent and wheat at 1.99 per cent in Oc­to­ber.

Assocham said the con­tin­u­ous in­crease in petrol and diesel prices must be taken care of by pol­i­cy­mak­ers since it may have im­pact on the im­port bill and, sub­se­quently, on ex­change rates. “It may also have a neg­a­tive im­pact on in­put prices for in­dus­try, which has started to feel pres­sure on its prof­itabil­ity,” Assocham said.

As per CPI data re­leased on Mon­day, re­tail in­fla­tion for Oc­to­ber rose to a 7-month high of 3.58 per cent on costlier food items, es­pe­cially veg­eta­bles. Be­sides, in­dus­trial out­put for Septem­ber ex­panded at 3.8 per cent on poor show­ing by man­u­fac­tur­ing cou­pled with fall in con­sumer durables out­put.

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