Wholesale inflation returns to positive zone after 18 months

Dearer food items like pulses, potato and sugar pushed up WPI inflation for April into the positive zone for the first time in 18 months to 0.34 per cent even as industry sharpened its pitch for a rate cut, saying the price rise is within the targeted level.

Breaking the deflationary trend, the wholesale price index (WPI) saw a moderate increase as prices of some items, especially minerals and fuels, declined, showed data from the Ministry of Commerce and Industry. Prices of some of the kitchen staples stayed sticky, which include pulses (36.36 per cent), potato (35.45 per cent) and sugar (16.07 per cent).

On the other hand, mineral prices in April shrank by 27.24 per cent, followed by onion (-18.18 per cent) and fuel and power (-4.83 per cent). Reacting to the numbers, Ficci President Harshavardhan Neotia remained hopeful that RBI, which is keeping a close watch on inflation, would come out with an accommodative monetary policy on June 7.

“It will be critical... that the momentum on reforms is maintained. Also, while RBI has been keeping a close watch on the ground situation, we hope to see a more accommodative stance in the June policy announcement,” Neotia said. WPI inflation stood at (-)0.85 per cent in March and (-)2.43 per cent in April of the previous year.

 Food inflation read 4.23 per cent in April this year compared with 3.73 per cent in March. Inflation in vegetables came in at 2.21 per cent compared with (-)2.26 per cent while the same in pulses was high at 36.36 per cent as against 34.45 per cent in March.

Other daily consumables such as fruits saw further easing of prices in April at (-)2.38 per cent. Among others, petrol prices fell 4.18 per cent whereas LPG was down 1.84 per cent.

But for manufactured products, prices stayed at an elevated level, up 0.71 per cent in April. The government also revised upwards the WPI-based inflation for February at (-)0.85 per cent as against (-)0.91 per cent earlier. “Inflation at the wholesale level printing at a positive number almost rules out chances of monetary easing in the near term, especially after retail inflation registered a higher-than-expected level last week,” said Richa Gupta, Senior Economist, Deloitte India. 

Last week, official data showed that consumer price index (CPI)-based inflation, commonly known as retail inflation, rose to 5.39 per cent in April, from 4.83 per cent in the previous month. Deloitte India maintained that the WPI number is still low and given the outlook on commodity prices, it is expected to remain low. “... pulses continue to be the sore point as far as food inflation is concerned.

 A spurt in potato and sugar prices in April shows that aberration in prices of select agricultural commodities due to supply shocks continues to have the potential to destabilise inflation and inflationary expectations,” said Sunil Kumar Sinha, Principal Economist, India Ratings & Research.