WPI IN­FLA­TION AT 14-MONTH HIGH OF 4.43%

Financial Chronicle - - FRONT PAGE - FC BUREAU

In­fla­tion based on whole­sale prices shot up to a 14-month high of 4.43 per cent in May on in­creas­ing prices of petrol and diesel, prompt­ing in­dus­try to de­mand ac­tion from pol­i­cy­mak­ers.

IN­FLA­TION based on whole­sale prices shot up to a 14-month high of 4.43 per cent in May on in­creas­ing prices of petrol and diesel, prompt­ing in­dus­try to de­mand ac­tion from pol­i­cy­mak­ers to keep fuel prices un­der check. The whole­sale price index (WPI) based in­fla­tion stood at 3.18 per cent in April and 2.26 per cent in May last year.

Ac­cord­ing to gov­ern­ment data re­leased on Thursday, in­fla­tion in food ar­ti­cles was at 1.60 per cent in May 2018, as against 0.87 per cent in the pre­ced­ing month.

In­fla­tion in ‘fuel and power’ bas­ket rose sharply to 11.22 per cent in May from 7.85 per cent in April as prices of do­mes­tic fuel in­creased in line with ris­ing global crude oil rates.

In­fla­tion in veg­eta­bles climbed to 2.51 per cent in May, with potato in­fla­tion at a peak of 81.93 per cent. Price rise in fruits was in dou­ble dig­its at 15.40 per cent, while pulses saw a de­fla­tion of 21.13 per cent. May in­fla­tion at 4.43 per cent was a 14-month peak. The pre­vi­ous high was in March 2017, when the WPI in­fla­tion stood at 5.11 per cent.

In­dus­try cham­ber As­socham called for the gov­ern­ment ac­tion to tame fuel price rise say­ing in­creas­ing prices of petrol and diesel may sig­nif­i­cantly im­pact im­port bills, which may sub­se­quently have an im­pact on ex­change rates. “Be­sides, it might also neg­a­tively im­pact in­put prices for the in­dus­try which has al­ready started feel­ing the pres­sure on its prof­itabil­ity,” As­socham sec­re­tary gen­eral DS Rawat said.

Icra prin­ci­pal econ­o­mist Aditi Na­yar said core WPI in­fla­tion rose sharply to 4.4 per cent in May from 3.6 per cent in the pre­vi­ous month, with a rise in 15 of the subindices. This re­flects the pass through of higher in­put costs, and a weaker ru­pee.

“The WPI in­fla­tion is ex­pected to harden by up to 0.80 per cent be­fore eas­ing some­what in the July-Septem­ber quar­ter. Key fac­tors that would in­flu­ence the in­fla­tion tra­jec­tory in­clude the level at which global crude oil prices sta­bilise and the ex­tent to which they are trans­mit­ted to do­mes­tic fuel prices, the trend in the mon­soon dis­per­sion and the ex­tent of change in MSPs,” Na­yar said.

The WPI in­fla­tion for March has been re­vised up­wards to 2.74 per cent from the pro­vi­sional es­ti­mate of 2.47 per cent.

In its sec­ond mone­tary pol­icy re­view for the fis­cal, the Re­serve Bank of In­dia (RBI) ear­lier this month hiked in­ter­est rate by 0.25 per cent – the first hike in more than four years – due to grow­ing con­cerns about in­fla­tion stoked by ris­ing global crude oil prices as well as do­mes­tic price in­creases.

The price of In­dian bas­ket of crude surged from $66 a bar­rel in April to around $74 cur­rently.

Data re­leased ear­lier this week showed re­tail in­fla­tion jumped to a 4-month high of 4.87 per cent in May on costlier food items such as fruits, veg­eta­bles and fuel. RBI mainly takes into ac­count re­tail in­fla­tion data while for­mu­lat­ing mone­tary pol­icy.

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