WPI in inflationary zone after 17 straight months of contraction

Pressure points remained in food, inflation for which accelerated to 4.23% in April from 3.73% in March

The Wholesale Price Index (WPI) rose 0.34 per cent in April after 17 straight months of fall. It had gone down by 0.85 per cent in March.

The WPI had recorded contraction for a full year in 1975-76. The last time WPI had shown inflation was in October 2014, at 1.66 per cent. Earlier, experts had predicted the index would turn around, on the back of a slow uptick in global commodity prices and food inflation.

Official data released on Monday showed the latest inflationary push was primarily due to a rise in food inflation and reversal in decline in prices of manufactured products, which rose 0.71 per cent in April after a long spell of deflation. Pressure points remained in food, whose inflation accelerated to 4.23 per cent in April from 3.73 per cent in March. “The considerable rise in prices of perishables such as fruits and vegetables can be attributed to the onset of summer as well as the drought-like conditions in a significant number of districts,” said Aditi Nayar, senior economist at ICRA.

Prices of pulses again started to climb in April, rising 36.36 per cent, up from the 34.45 per cent recorded in March. Pulses systematically provided the largest inflationary push among food articles for long, even as inflation came down a bit from 58.09 per cent in November.

Potato prices rose by 35.45 per cent in April, compared with 3.57 per cent rise in the previous month. Prices of larger category —vegetables — also rose 2.21 per cent in April, after declining in the previous two months.  However, onion prices fell 18.18 per cent in April after dropping 17.65 per cent in March.

Retail inflation had also jumped in April by a higher-than-expected 5.39 per cent after a six-month low of 4.83 per cent in March. Food inflation, the biggest component of the Consumer Price Index, had been responsible for this, rising 6.32 per cent in April against 5.21 per cent in March.  These days, the Reserve Bank of India looks at retail inflation to fix its policy rate. As such, economists said the policy rate cut in the monetary review might not be possible.

“... a rate cut in the Reserve Bank of India’s June 2016 policy review is ruled out. Although the agency still expects at least one more rate cut this fiscal, this will be contingent upon the monsoon and how it plays out,” India Ratings said.

The India Meteorological Department has predicted a greater than normal monsoon in 2016 and  even distribution of rains. If the prediction comes true, food inflation might come down once the monsoon starts from the second week of June, as is expected. Also, it will have a moderating effect on crude prices. Most economists ruled out a rate cut by RBI in its June policy review.

Non-food inflation in the primary category (those found in raw form) rose 7.12 per cent, lower than the 8.09 per cent rise seen in March.

In line with the latest trend, prices of manufactured products, which have a combined weight of 65 per cent in the index, rose 0.71 per cent, against a decline of 0.13 per cent in the previous month. Food inflation within the manufactured products, too, rose significantly to 8.01 per cent from 4.47 per cent.