Economy

Fuel, food prices drive WPI inflation to 4-month high of 3.18% in April

PTI New Delhi | Updated on May 14, 2018 Published on May 14, 2018

Wholesale food prices in April rose 0.67 per cent year-on-year, compared with a fall of 0.07 percent a month earlier.

ICRA Principal Economist says wholesale inflation is expected to continue to rise over the remainder of this quarter

Inflation based on wholesale prices touched a four-month high of 3.18 per cent in April on increasing prices of petrol and diesel as well as fruits and vegetables.

Wholesale Price Index (WPI)-based inflation stood at 2.47 per cent in March and 3.85 per cent in April last year.

WPI inflation, which was on a declining trend since December 2017, accelerated in April due to an unfavourable base effect, seasonal uptick in food prices as well as the pass through of rising global crude oil prices. In December, it stood at 3.58 per cent.

Food, fuel inflation

According to government data released today, inflation in food articles was at 0.87 per cent in April 2018, against a deflation of 0.29 per cent in the preceding month.

Deflation in vegetables stood at 0.89 per cent in April, while in the previous month it was 2.70 per cent. Inflation in fruits was in double-digit at 19.47 per cent in April, up from 9.26 per cent in March.

Inflation in ‘fuel and power’ basket rose sharply to 7.85 per cent in April from 4.70 per cent in March as the prices of domestic fuel increased in line with rising global crude oil rates.

In the ‘fuel and power’ basket, petrol inflation spiked to 9.45 per cent in April from 2.55 per cent in March; while diesel jumped to 13.01 per cent from 6.12 per cent in the previous month.

Rally in crude prices

A global rally in crude prices pushed up domestic fuel prices, with petrol at Rs 74.80 per litre and diesel at a record high of Rs 66.14 a litre.

ICRA Principal Economist Aditi Nayar said that the WPI inflation is expected to continue to rise over the remainder of this quarter.

“The government may prefer to wait for additional information about the level at which the monthly GST revenues stabilise after the e-way bill introduction, before reducing excise duty on fuels,” she said.

Key factors that would influence the inflation trajectory include the level at which global crude oil prices stabilise and the extent to which they are transmitted to domestic fuel prices, the early trend in the monsoon dispersion and the extent of change in MSPs, Nayar added.

The WPI inflation for February was revised upwards to 2.74 per cent from the provisional estimate of 2.48 per cent.

RBI policy review

In its first monetary policy review for the fiscal, the Reserve Bank last month maintained status quo on interest rate citing inflationary concerns. RBI mainly takes into account retail inflation data, which is slated to be released later in the day, while formulating monetary policy.

The central bank has revised downward forecast for retail inflation to 4.7-5.1 per cent for April-September and 4.4 per cent for October-March.

Published on May 14, 2018
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