WPI inflation climbs to a 27-month high in Feb
NEW DELHI: India’s wholesale price inflation shot up in February to a 27-month high at 4.17% with rise in fuel and food inflation while pricing power of manufactures further firmed up.
Data released by the industry department showed both food and fuel inflation entered positive territory rising by 1.36% and 0.58% in February while inflation rate of manufactured items rose 5.81% during the month.
Among food items, prices of onions, pulses, fruits firmed up from a year ago, while among manufactured items, processed food items, textiles, chemical products, plastic products, basic metals saw pricing pressure. Retail inflation in February, data for which was released on Friday, accelerated to 5.03% after falling to a 16-month low in January, as the pace of food and fuel price rises accelerated to 3.87% and 3.53%, respectively.
This is the last set of inflation data before the Reserve Bank of India (RBI) and the finance ministry announce a fresh inflation targeting framework in April. The central bank has supported maintaining the existing inflation target of 4% within a band of 2 percentage points. The Reserve Bank in a report on currency and finance (RCF) for 2020-21 has favoured retaining the current inflation targeting framework for the next five years.
“It is important to recognise that while setting a single target/ tolerance band for the next five years, structural changes that may materialise or the type of shocks that may hit the economy are difficult to anticipate fully. Hence, flexibility must be built into the framework, without undermining the discipline of the inflation target, which has to be forward-looking to ensure that inflation expectations are firmly anchored over the medium term to facilitate decisions on investment, savings and consumption,” the report said.
The central bank’s latest monetary policy in February had cautioned that the slowing of inflation could be short-lived with increased pass-through to output prices as demand normalises and firms regain pricing power. It marginally raised the inflation forecast to 5-5.2% from 4.6-5.2% for the first half of the next fiscal year while drawing comfort from slower food inflation.
Aditi Nayar, principal economist at ICRA Ltd said the WPI inflation surged in February primarily on account of rise in commodity prices brought on by the optimistic global sentiment, hardening of crude oil and fuel prices, and a fading of the favourable base effect for food items..