Costly manufactured items, fuels push up India’s May wholesale inflation

By Sarkaritel June 14, 2018 20:12

New Delhi, June 14  A major spurt in prices of manufactured items, food and fuels pushed India’s wholesale price index (WPI) for May to 4.43 per cent, higher than the 3.18 per cent recorded in April, 2018, and 2.26 per cent registered in May last year, the Commerce Ministry’s data showed on Thursday.

Earlier this week, Central Statistics Office data showed that the consumer price index (CPI), or retail inflation, in May had touched 4.87 per cent.

Citing risks to inflation mainly from rising global crude prices, the Reserve Bank of India (RBI) last week raised its key lending rate by 25 basis points to 6.25 per cent for the first time in over four years. The RBI has a median retail inflation target rate of 4 per cent.

The WPI Food Index, consisting of ‘Food Articles’ from Primary Articles group and ‘Food Product’ from Manufactured Products group, increased from 0.67 per cent in April 2018, to 1.12 per cent last month.

Expenses during the month under consideration on primary articles, which constitute 22.62 per cent of the WPI’s total weightage, rose by 3.16 per cent, from a fall of
(-)1.71 per cent in May 2017.

Among primary articles, food, which has a weightage of 15.26 per cent in the index, edged up last month by 1.60 per cent from a deceleration of (-)2.13 per cent reported for the same month last year.

The overall vegetable prices in May rose by 2.51 per cent, against a fall of (-)18.37 per cent in the same month a year ago.

Further, the data revealed that wheat became dearer by 3.05 per cent on a YoY basis. However, the prices of pulses came down by (-)21.13 per cent, but that of paddy became expensive by 4.19 per cent.

The protein-based food items such as eggs, meat and fish became marginally expensive by 0.15 per cent during the month.

As per the data, the prices of the sub-category of manufactured food products inched-up by 0.24 per cent.

The prices of manufactured products, which constitute 64.23 per cent of the WPI’s total weightage, rose by 3.73 per cent, from an increase of 2.55 per cent reported for the corresponding month of last fiscal.

The cost of fuel and power, which commands a 13.15 per cent weightage in the index, increased at a fast pace of 11.22 per cent during the month in review, from a growth of 7.85 per cent in April 2018.

Fuel-wise, the price of high-speed diesel rose by 17.34 per cent on a YoY basis, while that of petrol climbed by 13.90 per cent, whereas LPG became cheaper by (-)0.74 per cent.

Reacting to the WPI numbers, industry body Assocham urged policymakers to keep a check on petrol and diesel prices as these could “significantly impact import bills which may subsequently have an effect on exchange rates.”

“Besides, it might also negatively impact input prices for the industry which has already started feeling the pressure on its profitability,” Assocham Secretary General D.S. Rawat said in a statement.

“Rising crude prices would not only affect headline inflation but would also put pressure on price levels as the twin deficit goes up, thereby impacting government’s plan to increase rural spending and minimum support price for farmers ahead of general elections next year as it would exacerbate price pressures, and is likely to blow out the fiscal deficit target,” he added.

India Ratings and Research’s Principal Economist Sunil Kumar Sinha said: “Although inflation accelerated across several items vegetables, minerals, fuel and power emerged as the key drivers of WPI inflation for the month of May 2018.”

“Manufacturing inflation increased to 3.73% in May from 3.11% in April. Price pressure although is still not visible across all the manufacturing sectors but where they are visible and building up is vegetable oil, textile, apparel, basic metals, steel and chemicals.”

ICRA’s Principal Economist Aditi Nayar said: “The sequential uptick in the WPI inflation in May 2018 was fairly broad-based, led by all the major categories except manufactured food products.”

“Weakness in prices of pulses and fruits, doused the seasonal uptrend in prices of other food items, curtailing the rise in primary food inflation at a muted 1.6% in May 2018.”

By Sarkaritel June 14, 2018 20:12