Now, India’s wholesale inflation shoots up on steep food prices


India’s annual rate of inflation based on wholesale prices shot up to 3.55 per cent for July from 1.62 per cent in June, due to an 11.82 per cent jump in prices of food articles, official data showed on Tuesday. Reacting, industry voiced concern and said steps should be taken to arrest inflationary tendencies.

The prices of potatoes continued to pinch with an annual rise of 58.78 per cent, pulses were dearer by 35.76 per cent, while fruits were 17.30 per cent costlier over the same month in 2015, as per the Wholesale Price Index (WPI) data of the Commerce Ministry.

Data released last week showed that the country’s annual retail inflation shot up to a 23-month high of 6.07 per cent for July and beyond the official tolerance level of 6 per cent, again due to higher prices for food articles.

The July WPI index at 3.55 per cent marks a two-year high. After rising for the first time in April following 17 straight months of contraction, the WPI has cumulatively risen by 4.91 per cent in the current fiscal up to July. The rise was 0.85 per cent for the corresponding period in 2015.

Inflation in vegetables prices during July rose to 28.05 per cent, up from 16.91 per cent in June.

Prices of manufactured products, which comprise nearly 65 per cent of the index, continued to rise for the fifth straight month, rising by 1.82 per cent in July. The prices had risen by 1.17 per cent in June.

The sub-category of manufactured food products, which includes sugar and edible oils, registered a significant rise of 10.19 per cent, up from 8.35 per cent in June.

This was mainly caused by a spurt in sugar prices, which rose by 32.33 per cent, as against 26.09 per cent in June, as a result of production shortages.

Fuel inflation remained negative in July, going down by one per cent as compared to a 3.62 per cent fall in June and 6.14 per cent in May due to fall in crude oil prices.

However, diesel prices continued to rise after seeing an uptrend in June after many months of consecutive fall. Prices of high-speed diesel rose by 6.57 per cent in July, from a 1.13 per cent rise in June.

In this connection, industry chamber Assocham said on Sunday on the basis of its study that prices of vegetables in India’s retail markets are likely to go up further in the coming months with the peak production season coming to an end.

The report said there would be “more pressure on the market arrivals of vegetables as production season eases”, on the basis of a “most worrying” trend that saw vegetable prices rising up to 100 per cent in the April-July period due to low arrivals of the harvest in the markets.

“There is a huge gap between retail and wholesale prices of vegetables. On an all-India average basis, retailers are selling at more than 52.7 per cent of wholesale prices,” Assocham Secretary General D.S. Rawat said in a statement here.

The gap between wholesale and retail prices is as much as over 75 per cent in some cases like brinjal and over 62 per cent for tomatoes, the report said.

The July WPI shooting up also contributed to the downward trajectory of Indian stock market indices on Tuesday.

Commenting on the inflation numbers, president of industry chamber FICCI Harshavardhan Neotia said: “It will be important to keep a close watch on the situation over the coming months and all steps on the supply side be taken to ensure that these inflationary tendencies get arrested fast.”

Assocham said the July WPI figures may give some relief to manufacturers and producers since earlier it was hampering their pricing power and profitability and limiting their potential to increase capital expenditure.

The chamber warned that increase in WPI may result in increase in CPI which may affect the households and final consumers badly.

“Therefore, policy makers should take concrete steps to minimise the transition of price rise from WPI to CPI. The economy of India now is in need of strong actions from Government of India to address the structural issues of demand and supply within the industry,” Assocham said in a statement here.