WPI Inflation rises to over three year high at 6.5% on food, fuel prices

The wholesale price index-based inflation (WPI) jumped to a 39-month high of 6.55 per cent in February compared to 5.25 per cent in the previous month on the back of expensive food and fuel items, even as manufacturing products saw a decline in inflation. The data justifies the Reserve Bank of India's caution on loose monetary stance amid expected increase in interest rates in the United States in the next few days.

Expectations are that the consumer price index (CPI)-based inflation would also break its six-month declining spree in February on the support of food prices. The data for CPI inflation would come later today.

Icra principal economist Aditi Nayar pegged CPI inflation at 3.9 per cent in February against 3.2 per cent in January.

With this, the gap between WPI and CPI, which has been widening in the last few months, would narrow down.

In fact, food has a higher weight of over 45 per cent in CPI than just 14.3 per cent in WPI. 

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higher weight of over 45 per cent in CPI than just 14.3 per cent in WPI. 

In WPI, food inflation rose from 1.3 per cent in January to five per cent in February as cereals and fruits turned expensive at the rising rate. 

In fact, vegetables continued to see a fall in prices in February though at a decreasing rate. Deflation in vegetables (decrease in prices) came down to eight per cent in February against 32.3 per cent in January. Pulses also saw deflation of 0.8 per cent against inflation of 6.2 per cent in these months. 

Non-food articles, comprising fibre, minerals, saw inflation rising to 6.5 per cent in February against almost two per cent in January. Similarly, fuel items turned expensive by 21 per cent against 18.1 per cent in these months. 

However, manufacturing products saw inflation falling to 3.66 per cent against 3.99 per cent. 

Explaining the reasons, Nayar said the rupee had strengthened against the dollar in February against January which made imports of these products cheaper. A dollar was equal to Rs 68.1 on an average in January, while the value came down to Rs 66.9 in February. 

Also, global metal prices trends were mixed against the rising spree it saw in earlier months, she said.