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Wholesale inflation at 2-year low of 2.45%; food inflation eases to 6.99%

The WPI inflation rate in manufactured items declined to 1.28% in May, from 1.72% in April

Indivjal Dhasmana  |  New Delhi 

Vegetable, Retail inflation

Charting a divergent path from its retail price counterpart, the wholesale price index- (WPI)-based inflation rate fell to a 22-month low at 2.45 per cent in May, reflecting weak demand in the economy.

The WPI inflation rate in May is the lowest since July 2017, when it was at 1.88 per cent. The food inflation, too, declined from over 30-month high of 7.37 per cent in April, but it still remained at an elevated level of 6.99 per cent.

Sunil Kumar Sinha, principal economist at India Ratings, said despite a lower rate of price rise in May compared to April, stress is emerging in food articles category.

“Here inflation is in high single digit. Besides, some cereals such as jowar, bajra and maize, pulses witnessed double-digit inflation for the fourth consecutive month. This against the backdrop of delayed and less-than-normal monsoon could aggravate the food inflation further in the coming months, lest the government monitors the situation proactively, checks speculative activities and intervenes in the market to stabilise prices,” he said.

Wholesale inflation at 2-year low of 2.45%; food inflation eases to 6.99%

Food inflation rates might have also led to divergent movement of WPI and consumer price index- (CPI)-based inflation rates. The CPI food inflation rate rose from 1.1 per cent in April to 1.83 per cent in May, leading to increase in overall inflation from 2.99 per cent to a seven-month high of 3.05 per cent over this period.

Food items have over 45 per cent weight in CPI against 15 per cent in WPI. It is rather the manufactured items, which have an overwhelming weight of 64 per cent in WPI.

The WPI inflation rate in manufactured items declined to 1.28 per cent in May, from 1.72 per cent in April.

The inflation rate in fuel group dropped to one per cent from 3.8 per cent in this period.

The core inflation rate (inflation rate in manufactured items minus food products) fell to a 29-month low to 1.2 per cent in May. This is clearly an indication of the weakening of demand impulse in the economy. Dwindling auto and FMCG sales growth has been pointing towards this for past several months,” said Sunil Kumar Sinha, principal economist at India Ratings.

Lower inflation in manufactured items could also be due to cuts in the GST rates last year.

“This also indicates that for India Inc, pricing power will be constricted. A part of the reason for low inflation for manufactured goods would also be the lowering of certain commodity specific GST rates over last year,” said Madan Sabnavis, chief economist at CARE Ratings.

First Published: Sat, June 15 2019. 02:17 IST
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