Wholesale inflation at 5-month high

Rises on costly food items, fuel & manufactured goods

Wholesale Price Index (WPI)-based inflation rose to a five-month high of 6.01 per cent in May from 5.2 per cent in the previous month, driven by costlier protein-based items, fuel and some manufactured products.

In May 2013, WPI inflation was 4.58 per cent.

Core inflation (inflation for manufactured products, excluding food items) rose to 3.8 per cent in May from 3.4 per cent in April, showed official data released on Monday. The data present a complex picture before the government and the Reserve Bank of India (RBI), as retail inflation, gauged by the Consumer Price Index (CPI), eased to a three-month low of 8.28 per cent in May.

Economists said the central bank might continue to maintain status quo on the policy rate front in the wake of expectations of a subnormal monsoon and its impact on agricultural production.

The rise in WPI inflation was primarily due to an increase in food inflation, which rose to 9.5 per cent in May from 8.64 per cent in April. While fuel prices rose 10.53 per cent, against 8.93 per cent in April, inflation for manufactured products stood at 3.55 per cent, against 3.15 per cent in the previous month.

Onion prices, which the government is monitoring for imposition of a minimum export price, fell 2.83 per cent in May, against 9.76 per cent in April, 15 per cent in March and 27.5 per cent in February. Potato prices rose 31.44 per cent, against 31.56 per cent in April. Overall, vegetable prices fell 0.97 per cent in May, against a rise of 1.34 per cent in April.

Milk turned costlier by 9.57 per cent, against 9.19 per cent in April. Inflation for non-vegetable items such as eggs, meat and fish stood at 12.47 per cent in May, against 9.97 per cent a month earlier. Inflation for fruit rose to 19.4 per cent from 16.46 per cent in April.

Chandrajit Banerjee, director-general of the Confederation of Indian Industry, said to address the high inflation, the government should consider a multi-pronged approach, including implementing the model Agricultural Products Marketing Committee Act, developing advanced supply chains, rationalising input subsidies, effecting moderation in minimum support price and encouraging foreign direct investment in retail.

Debopam Chaudhuri, chief economist, ZyFin Research, said, “We expect prudent food supply management by the new government to play a significant role this year in controlling food inflation; this has the potential to annul any adverse price impact resulting from unfavourable weather conditions.”

Among non-food items in the primary (unprocessed) category, inflation for oil seeds was 4.82 per cent in May, against 0.43 per cent in April.

Fuel inflation stood at 10.53 per cent in May, against 8.93 per cent a month earlier. The prices of manufactured products rose 3.55 per cent, against 3.15 per cent in April.

The ongoing crisis in Iraq has posed a risk to oil prices. “India’s vulnerability to an increase in inflation in coming months has increased on account of higher oil prices, with an escalation in geopolitical tensions and the subnormal monsoon so far (48 per cent below normal). With RBI’s focus on inflation-control, a cut in interest rates is unlikely in the coming monetary policy meet,” CARE Ratings said in a note.

In the manufactured goods (processed) category, prices of food products rose 2.15 per cent in May, against 1.98 per cent in April. Inflation for manufactured products such as metals and chemicals also saw a rise.