New Delhi: The wholesale price-based inflation or WPI jumped to 0.79 per cent in May with vegetable prices witnessing a double-digit growth.
Today’s data marks the second consecutive month of rise, after 17 straight months of fall. The April WPI-based inflation was at 0.34 per cent and in March it was (-) 0.45 per cent.
Government data showed food inflation rose to 7.88 per cent in May as against 4.23 per cent in April. Inflation in vegetables came in at 12.94 per cent, a sharp rise from 2.21 per cent, a month earlier. Pulses inflation remained stubborn at 35.56 per cent.
Prices of egg, meat and fish paced up by 9.75 per cent and in fruits the rise was 3.80 per cent. However, kitchen staple onion continued to witness decline at (-)21.70 per cent in May.
Manufactured products inflation too inched up to 0.91 per cent from 0.71 per cent in April.
The hardening of WPI follows the trend of retail inflation released yesterday. Retail inflation touched a 21-month high of 5.76 per cent in May mainly due to rising prices of food items.
The data could further dent the chances of a interest rate cut by Reserve Bank of India in its policy review in the months ahead.
In its policy review earlier this month, the Central Bank retained January 2017 retail inflation target at 5 per cent, though with an upward bias on account of firming of oil prices and implementation of 7th Pay Commission recommendations.
"The inflation surprise in the April reading makes the future trajectory of inflation somewhat more uncertain," Reserve Bank of India Governor Raghuram Rajan had said during the second bi-monthly monetary policy update, while holding back all key policy rates and reserve ratios to control money supply.
The Associated Chambers of Commerce and Industry of India (Assocham) pointed out that rise in WPI was in line with industry’s expectations, as it got some upward push due to the increase in global crude oil prices.
“But policymakers need to check and address through supply-side responses the continuous rise in prices of commodities like pulses, food articles, cereals, wheat and other items of national interest that have been soaring continuously,” said D.S. Rawat, Secretary General of Assocham.
“Though WPI figures may give some relief to manufacturers and producers since earlier it was hampering their pricing power, profitability and limiting their potential to increase capital expenditure.”
Rawat further said that the declining trend in the index of industrial production (IIP) and rising WPI may have a negative impact on the country’s economy in the long run.
Another leading industry chamber Ficci (Federation of Indian Chambers of Commerce and Industry) said that the latest WPI-based inflation edged up on the back of elevated food prices.
"This clearly calls for a more proactive management from the supply side. Several steps have been taken by the government to augment supplies and improve distribution of such items," said Harshavardhan Neotia, President, Ficci.
"We hope that the situation would be managed well and that inflation will remain within RBI's indicative trajectory."
Currently, the central bank has set a target to hold the CPI at five per cent by March 2017.
"Industrial growth, particularly the manufacturing sector, continues to remain under pressure with limited signs of improvement in a few sectors," Neotia said.
"We need to broad base the growth impulses and this calls for support by way of an accommodative monetary policy."
(With IANS inputs)
