India's wholesale inflation mounts to 54-month high at 5.77 per cent
New Delhi: Rise in the prices of manufactured products along with that of food articles and fuel types accelerated India’s wholesale inflation rate to 5.77 per cent compared to 4.43 per cent in the previous month, official data showed on Monday.
The Ministry of Commerce and Industry data disclosed that June WPI rate was also higher on year-on-year (YoY) basis. It had risen by 0.90 per cent in June 2017.
“The annual rate of inflation, based on monthly WPI, stood at 5.77 per cent (provisional) for June 2018 (over June 2017) as compared to 4.43 per cent (provisional) for the previous month and 0.90 per cent during the corresponding month the previous year,” the Ministry said.
“Build up inflation rate in the financial year so far was 2.49 per cent compared to a build up rate of (-) 0.44 per cent in the corresponding period of the previous year.”
On a sequential basis, the expenses during the month under consideration on primary articles, which constitute 22.62 per cent of the WPI’s total weightage, rose by 5.30 per cent, from a marginal rise of 3.16 per cent in May 2018.
Among primary articles — food articles — which has a weightage of 15.26 per cent in the index, edged up last month by 1.80 per cent from an acceleration of 1.60 per cent reported for May.
The cost of fuel and power, which commands a 13.15 per cent weightage in the index, increased at a fast pace of 16.18 per cent during the month, from a rise of 11.22 per cent in May.
Similarly, expenses on manufactured products increased by 4.17 per cent, from 3.73 per cent in the previous month.
On a YoY basis, onion prices in June soared higher by 18.25 per cent and potatoes by 99.02 per cent. The overall vegetable prices in June rose by 8.12 per cent, against a fall of (-)21.22 per cent in the same month a year ago.
The data showed that wheat became expensive by 5.14 per cent on a YoY basis, while paddy became dearer by 3.71 per cent.
However, protein-based food items such as eggs, meat and fish became marginally cheaper by (-) 0.07 per cent during the month.
As per the data on YoY basis, the sub-category of manufactured food products registered a rise of 4.17 per cent.
The prices of both high-speed diesel and petrol climbed higher than in the previous month of last year, by 17.45 per cent and 21.63 per cent.
In addition, the acceleration in WPI rate adversely impacted the key domestic equity indices. The barometer 30-scrip Sensex on the BSE, which had opened at 36,658.71 points, closed at 36,323.77 points — down 217.86 points or 0.60 per cent — from its previous close of 36,541.63 points.
According to Aditi Nayar, Principal Economist at ICRA: “The lagged transmission of higher crude oil prices, an uptick in cotton prices and electricity tariffs, the hardening of inflation for manufactured products as well as an unfavourable base effect, led to the sharp pickup in the WPI inflation to a 54 month high in June 2018.”
“The hardening of the YoY WPI inflation in June 2018 relative to the previous month was pervasive, led by all the major sub-sectors of the WPI.”
India Ratings & Research’s Director for Public Finance and Principal Economist Sunil Kumar Sinha said: “Even core inflation or inflation in items other than food and fuel has shown a sustained increase over the past three months. Higher core inflation is often interpreted as indication of reduction in output gap in the economy. However, situation appears to be more complex.”
“On the one hand industrial growth slowed to a seven-month low in May 2018 and several manufacturing sectors are still saddled with excess capacity and on the other hand core sector inflation at 4.8 per cent is the highest print in the new WPI series.”
The rise in WPI rate comes days after the Central Statistics Office (CSO) revealed that retail inflation in India touched the 5 per cent mark in June, compared to 4.87 per cent in May.
As per CSO’s data, the average annual rate of inflation as per the consumer price index (CPI) in June last year was 1.46 per cent.
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