Soaring food prices push WPI inflation to highest in 20 months

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NEW DELHI: AS prices of essential fruits and vegetables hit the roof, the country’s wholesale price index-based inflation more than doubled in June compared to the previous month, an indication of the tremendous stress on foodstuff prices. This is the fourth consecutive month in which prices have increased.

According to Commerce Ministry data released on Thursday, wholesale price inflation increased to 1.62 percent in June from 0.79 percent in May, after it turned positive in April.

The WPI inflation has quickened to its highest in 20 months from staying at 0.79 per cent each in April and May,  after staying in the negative zone for 17 straight months.

With retail price index-based inflation inching up to a 22 month high of 5.77 percent from 5.76 percent, the Reserve Bank of India may be prompted to maintain a status quo in the policy rate in its monetary review meeting next month, say experts.

“Rate cut by RBI in August is definitely a no. The RBI is likely to maintain a status quo for a significant period of time,” Indranil Pan, chief economist, IDFC Bank said.

The primary component drving soaring WPI inflation have been vegetables, which saw inflation rising to 16.91 percent in June from 12.94 percent in May. The rate of price rise in vegetables stood at just 2.90 percent in April, before which it saw three consecutive months of decline between January to March 2016.

While potatoes saw an increase of 64.48 percent in June from 60.01 percent in the previous month, fruit inflation also recorded an upswing, rising to 5.97 percent from 3.8 percent.

“We are seeing a continuation of price pressure in case of commodities like pulses and vegetables. Dealing with this trend calls for supply side measures both from the point of view of enhanced production and seamless distribution,” said Harshavardhan Neotia, President, FICCI.

In the June policy review, RBI Governor Raghuram Rajan chose not to cut rates further as consumer price inflation surged to 5.4 percent in April, higher than the annual target of 5 per cent. Observers say the RBI may still want to wait to see how the monsoon pans out before choosing to cut rates again.