India's annual wholesale inflation shoots up to 1.62% (Roundup)

Ballooning food prices pushed up India's annual wholesale inflation to a 20-month high of 1.62 per cent for June from 0.79 per cent in May, according to official data released on Thursday, which India Inc said was in line with industry's expectations.

This kept inflation in the positive domain for the third month after 17 months in the negative.

The annual inflation for potatoes, as per data on official wholesale price index (WPI) released by the Commerce and Industry Ministry, was as much as 64.48 per cent, while for pulses it was 26.61 per cent. Vegetable prices were 16.91 per cent higher and sugar dearer by 26.09 per cent.

Just two days ago, official data had showed that high food prices have pushed up India's annual retail inflation to 5.77 per cent in June. The annual retail food inflation moved up to 7.79 per cent, against 7.47 per cent in May.

Significantly, data released on Thursday showed that the final wholesale price index for the month of April was revised upward to suggest a higher annual inflation rate of 0.79 per cent against 0.34 per cent as reported earlier.

Among other items, the wholesale prices of petrol have declined 8.74 per cent in the past year, while for diesel, they are up 1.13 per cent.

Data showed that there has also been a sharp seasonal build-up since the start of this fiscal. As a result, potato prices were up 54.38 per cent in June in a matter of three months while that of vegetables in general were up 39.97 per cent. Pulses in this period were 15.50 percent costlier.

Commenting on the data, the Associated Chambers of Commerce and Industry of India (Assocham) said that the rise in WPI is in line with industry expectations.

"Production denoted by IIP numbers released recently showed weak and unstable demand within the industry itself, which might have forced industry to control and manage its exisiting over production and over capacity through restricting supply or put a cap on production, which have resulted in increase in WPI numbers though marginally," it said in a release.

"Prices of pulses, vegetables, fibres, cereals, rice, sugar, wheat and oil seeds have been continuously rising, which policy makers should check and address through supply side responses," said Assocham Secretary General D.S. Rawat.

The apex chamber warned that weak index of industrial production (IIP) numbers followed by rise in WPI numbers may lead to transition of high prices from producers to consumers, which will eventually lead to rise in retail inflation and could dissuade the Reserve Bank of India (RBI) from cutting key interest rates in coming bi-monthly policy reviews.

"RBI would not be in a position to address the demand and supply in India when CPI (consumer price-indexed inflation) is at high level," it said.

"We rule out a rate action in the August policy as RBI would be closely monitoring the higher than seasonal surge in vegetable prices and the pace of monsoons," said Suvodeep Rakshit, economist at Kotak Institutional Equities.

--IANS

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