WPI inflation hits 0.79% in May, fastest pace since Oct 2014

New Delhi: A sharp spike in vegetable prices like tomato pushed wholesale price inflation to 0.79 per cent in May — the fastest pace since October 2014 — sending the government scrambling for ways to control it.

The faster-than-expected 0.79 per cent rise in wholesale prices comes on top of consumer prices (retail inflation) surging 5.76 per cent in May, the fastest rate in 21 months.

The WPI inflation print in May compared against 0.34 per cent rise in April and (-) 0.45 per cent in March. WPI inflation stood at (-)2.20 per cent in May last year, according to government data released here today.

Tomato prices in most retail markets across the country have doubled to Rs 80 per kg in the last 15 days due to sluggish supply owing to crop damage. Potato rates have also been on the rise.

Retail prices of pulses are still ruling high at over Rs 170 a kg.

Concerned over rising prices of pulses and other essential commodities, Finance Minister Arun Jaitley is slated to review the situation when he meets key ministers, including Transport Minister Nitin Gadkari, Food Minister Ram Vilas Paswan, Agriculture Minister Radha Mohan Singh and Commerce Minister Nirmala Sitharaman, tomorrow.

Steps to check food inflation as well as efforts being taken to boost supply of pulses through its newly-created buffer stock and also from imports are likely to be discussed.

Industry too is demanding policy action to address supply-side constraints.

With the firming up of both wholesale and retail inflation, the Reserve Bank may delay the interest rate cut despite a sluggish industrial output.

WPI Inflation in vegetables stood at 12.94 per cent in May, a sharp rise from 2.21 per cent a month earlier. Pulses inflation remained stubborn at 35.56 per cent.

Food inflation rose to 7.88 per cent in May as against 4.23 per cent in April, the data showed.

“Policymakers need to address through supply-side responses the continuous rise in prices of commodities like pulses, food articles, cereals, wheat and other items,” Assocham Secretary General D S Rawat said.

Experts said a favourable base effect and a good monsoon would lead to some dip in wholesale food inflation in the immediate term.

“The trajectory of the WPI inflation would be shaped by global commodity price movements. If crude oil prices sustain at current levels, average WPI inflation is likely to exceed 3 per cent this fiscal,” ICRA Senior Economist Aditi Nayar said.

As per the data, manufactured product inflation too inched up to 0.91 per cent, from 0.71 per cent in April. Fuel and power inflation was (-)6.14 per cent in May.

The hardening of WPI food inflation follows the trend of retail inflation, released yesterday. RBI mainly takes into account retail inflation while formulating its monetary policy.

Retail inflation touched a 21-month high of 5.76 per cent in May mainly due to rising prices of food items.

Industrial output contracted by 0.8 per cent in April, the first decline in three months, due to a drastic fall in capital goods production and manufacturing activities.

As per the inflation data, prices of egg, meat and fish paced up by 9.75 per cent, and in cereals and fruits, the rise was 4.60 per cent and 3.80 per cent, respectively. However, kitchen staple onion continued to witness decline at (-)21.70 per cent.

“Globally, there has been some bottoming of commodity prices, which will get reflected in WPI, going forward. We believe that a range of 2-3 per cent should not be worrisome for the economy and a normal monsoon should ensure the same,” CARE Ratings said.

After two consecutive years of drought, the Indian Meteorological Department has predicted an ‘above-normal’ monsoon this year.


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