Wholesale inflation at 10-month high on costlier onion, potato

Wholesale prices-based inflation accelerated to a 10-month high of 3.10% in January mainly due to costlier food articles, particulary onion and potato, official data showed on Friday.

The wholesale price index (WPI) based inflation was at 2.59% in December 2019, and 2.76% in January 2019, as per the data released by the Ministry of Commerce and Industry.

The earlier high was recorded in April 2019, when the WPI inflation stood at 3.18%.

During January this year, the rate of price rise for food articles stood at 11.51% as against 13.24% a month earlier.

Inflation in the vegetable category stood at 52.72%, while onion prices spurted by a whopping 293%, followed by potato at 87.84%.

In the manufactured food category, wholesale inflation was recorded at 0.34% against a negative print of 0.25% in December. Likewise for fuel and power category, it was at 3.42% against (-) 1.46%.

Meanwhile, ICRA Principal Economist Aditi Nayar said the WPI inflation could go up further in the coming months mainly because of higher import duties.

"Higher customs duties would push up the inflation related to imports to some extent going forward. However, the impact of the spread of the coronavirus on risk sentiment and commodity prices, including crude oil, is expected to exert a substantial moderation on the wholesale inflation in February 2020," she said.

Nayar attributed the uptick in inflation for manufactured food items to a spike in various edible oils as well as dairy products, which she said is expected to sustain in the coming months.

"Even with a further correction anticipated in vegetable prices in February 2020, the primarily food inflation may persist in double-digits in that month," she added.

Earlier this week, retail inflation based on consumer price index (CPI) soared to a near six-year high of 7.59% in January, surpassing the Reserve Bank of India's comfort range primarily on account of rising vegetable and food prices.

This was the highest rate of inflation since May 2014, when it came in at 8.33%.

Last week, the RBI Monetary Policy Committee (MPC) in its bi-monthly monetary policy review had kept the key interest rate unchanged at 5.15% while maintaining an accommodative stance.

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Free Press Journal