WPI jumps to 39-month high of 6.55% in Feb

RBI may not cut rate at April meeting

Snapping a trend of last four months, both inflation numbers based on the consumer price index (CPI) and the wholesale price index (WPI) moved in the same direction, rising in February against the previous month.

While WPI inflation jumped to a 39-month high of 6.55 per cent in February compared to 5.25 per cent in the previous month, the CPI inflation rose to a three-month high of 3.6 per cent from 3.2 per cent.

The data justified 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. The likelihood of RBI cutting the policy rates in April remained subdued.

The inflation numbers were up on the back of expensive food and fuel items, even as manufacturing products saw a decline in inflation.

With this gap between WPI and CPI which have been widening in the last few months would narrow down a bit.

However, the rise in WPI was much sharper than CPI.

"WPI inflation recorded a much sharper uptick in February 2017 relative to the sequential rise in CPI inflation. Some of the factors that led to the spike in WPI inflation are not part of the CPI basket, for instance commodities such as crude oil and coal," said ICRA principal economist Aditi Nayar.

She said the lagged revision in the minerals sub-index, particularly for crude oil, contributed to the sharper-than-anticipated spike in WPI inflation.

Sunil Kumar Sinha, Principal Economist, India Ratings & Research, also attributed this trend to the escalation in the prices of minerals and fuel prices.

In CPI, food inflation rose to two per cent in February from 0.6 per cent in February.

In WPI, food items saw inflation of 2.7 per cent in February from deflation (fall in prices) of 0.6 per cent in January.

However, vegetable prices kept falling in both the CPI and WPI, but the rate of decline came down in February compared to January.

In terms of retail price index, the deflation stood at 8.3 per cent in February against 15.6 per cent in the previous month.

In terms of WPI, deflation in vegetables (decrease in prices) came down to eight per cent in February against 32.3 per cent in January.

Pulses saw fall in retail prices at the rate of 9 per cent in February against 6.6 per cent in the previous month, while these witnessed WPI deflation of 0.8 per cent against inflation of 6.2 per cent.

Cereals and fruits turned expensive at the rising rate in both the indices in February against the previous month.

Similarly, fuel items turned expensive, but the rate was higher in WPI than CPI. In WPI, fuel inflation rose to 21 per cent in February against 18.1 per cent in the previous month, while in CPI it rose to 3.9 per cent against 3.4 per cent.

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

Explaining the reasons, ICRA principal economist Aditi 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.

Various sorts of services such as education, health, recreation, personal care and effects saw inflation cooling in February against January in terms of retail price index. WPI does not measure services.