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India's annual wholesale inflation moves up

 2015-11-16 16:03:59.0

inflation going up

New Delhi : India's annual rate of inflation, based on wholesale prices, inched up to (-)3.81 percent for October from (-)4.54 percent for the month before, mainly on account of a whopping 86 percent spike in the prices of onions and 53 percent in pulses over the past year.

The annual inflation rate, based on the official wholesale price index (WPI), was ruling at 1.66 percent in October, last year.�The firmness in the annual rate of inflation was attributed to rise in prices of onions, pulses, wheat, vegetable and edible oils which have continued to hit household budgets.

The recent 50 basis points easing of key lending rates by Reserve Bank of India (RBI) was blamed for the 10-basis point rise in inflation. So was, the deficiency in rainfall during the monsoon months. However, October was the twelfth consecutive month since the WPI entered into the negative terrain. The softening of potato, minerals, high speed diesel, petrol, sugar and iron prices kept the WPI in negative terrain for the month under review.

Furthermore, the data furnished by the Ministry of Commerce and Industry, reported a revised rate of the headline inflation for August. The WPI inflation was revised lower to (-)5.06 percent from (-)4.95 percent which was reported on September 14, this year.

For the last six months, the revised WPI data has been (-)0.95 percent in January, (-)2.06 percent in February to (-)2.33 percent in March to (-)2.43 percent in April, (-)2.20 percent in May, (-)2.13 percent in June, (-)4.00 percent in July and (-) 5.06 percent in August.

The October data revealed that among the three major sub-indices of the WPI, the inflation rate for primary articles and manufactured products declined by 0.36 percent and 1.67 percent, respectively. The index for fuels and power plunged by 16.32 percent. Nonetheless, food inflation was higher by 2.44 percent from 0.69 percent recorded in September and 2.74 percent in the corresponding month of last year.

During the month under review, some commodities of mass consumption continued to upset household budgets and notable among them was onion, whose price was higher by as much as 86 percent over the like month of the previous year. Pulses were dearer by 53 percent. In the past month alone, prices for urad dal rose 17 percent, arhar 12 percent, gram 7 percent and moong 6 percent.

Other food items such as wheat and vegetables recorded modest price increases on a year-on-year (YoY) basis. Wheat was costly by 4.68 percent, while vegetable prices rose by 2.56 percent. The WPI data comes on the back of retail inflation for September, based on the consumer price index (CPI) which increased to 5.00 percent -- from 4.41 percent recorded for the previous month.

Even under the manufactured products category, prices of commodities pertaining to food fell -- especially sugar that was lower by 14.54 percent, followed by food products which were down to 0.23 percent on YoY basis. Notwithstanding the downward price trend, edible oil prices grew by 4.53 percent YoY. Under fuels -- the index for which was down 16.32 percent -- petrol was cheaper by 13.16 percent and diesel by 26.21 percent. Cost of cooking gas fell by 5.83 percent.

India Inc welcomed the WPI trend stating that inflationary pressures are likely to remain muted due to subdued international commodity prices. WPI inflation has continued to remain negative for a full year, indicating downward pressure on the price of a range of commodities," said Chandrajit Banerjee, director general, Confederation of Indian Industry (CII).

Nevertheless, the industry raised some concerns over the deflationary pressure the negative WPI will have on the finished goods category. In addition, the October data showed that the price of both primary and manufactured products remained unchanged from the previous month, while the index for fuel prices increased. This may have a lagged impact on finished good prices by raising transportation costs," Banerjee added.

Other major industry body, the Federation of Indian Chambers of Commerce and Industry (Ficci) cited that a persistent negative WPI reflected a weak demand scenario in the economy. At this point in time, all steps should be taken for improving the demand situation in the economy and bringing pricing power back in the hands of manufacturers. As overall demand improves, investments will also get a boost,� said A. Didar Singh, secretary general, Ficci.

Singh pointed out that the latest inflation numbers report pressure building up in the food segment with prices of commodities like pulses and oil seeds edging up. The Associated Chambers of Commerce and Industry of India (Assocham) raised concerns over the possibility of deflationary conditions setting in the economy.

�Though the continuous downtrend in WPI seen over the past few months is a positive signal towards stabilization of prices, but the policy makers need to check for the deflationary trends from setting in the economy,� said D.S. Rawat, secretary general of Assocham.

The industry body indicated that a 10 basis point increase in inflation could be a resultant of the recently announced rate cut by the RBI. Assocham added that further excise tax hike on petrol, diesel and cess imposition on services put together are likely to put an upward pressure on the November WPI. (IANS)

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