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Rise in food prices accelerates India's wholesale price inflation

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An exponential rise in food prices accelerated India’s annual rate of inflation based on wholesale prices to 3.59 per cent in October.
According to data from the Ministry of Commerce and Industry released on Tuesday, the wholesale price index (WPI), with the revised base year of 2011-12, went up in October to 3.59 per cent from 2.60 per cent in September.
Reacting to the data, India Inc. said the rise in inflation was in line with the industry’s expectations owing to factors like marginal rise in demand together with increase in prices of crude oil and other commodities globally. However, it also said the policymakers should take corrective measures to address the challenges.
On a segment-wise basis, the expenses on primary articles, which constitute 22.62 per cent of the WPI’s total weightage, edged higher by 3.33 per cent from an increase of 0.15 per cent in September 2017.
The prices of food articles rose by 4.30 per cent from an acceleration of 2.04 per cent during September 2017 and a rise of 2.98 per cent in October 2016.
In terms of food prices, the YoY (year-over-year) wholesale inflation rate for onion was higher by 127.04 per cent, whereas for potatoes it plunged by (-)44.29 per cent.
In contrast, the overall vegetable prices in October rose by 36.61 per cent, against a fall of (-)11.84 per cent in the same month a year ago.
As per data, wheat became cheaper by (-)1.99 per cent on YoY basis and the prices of pulses came down by (-)31.05 per cent, but paddy became dearer by 3.10 per cent.
Protein-based food items such as eggs, meat and fish became expensive by 5.76 per cent during the month under review.
Prices of other major group under the WPI, manufactured products, which comprise nearly 64.23 per cent of the index, recorded a 2.62 per cent rise.
The sub-category of manufactured food products registered a rise of 1.26 per cent.
Fuel and power prices accelerated by 10.52 per cent.
Product-wise, the price of high-speed diesel rose by 15.43 per cent during October while that for petrol climbed by 12.87 per cent and for LPG by 26.53 per cent.
This is the second macro-economic inflation data point for October that has shown a surge in prices.
The consumer price index (CPI) inflation for October rose to 3.58 per cent from 3.28 per cent reported for September.
The CPI inflation last month on a YoY basis was lower than 4.20 per cent recorded in October 2016.
The overall food prices, as gauged by the Consumer Food Price Index (CFPI), rose to 1.90 per cent during the month under review from 1.25 per cent in September 2017.
“The policymakers must take corrective action to address challenges being faced by the industry — rising interest rates, twin balance sheet, limited investment capacity and others,” said Secretary General, Assocham, D.S. Rawat.
He also stated that rise in WPI numbers may have corresponding upward impact on CPI (Consumer Price Inflation) which may limit the possibility of rate cut by the Reserve Bank of India (RBI), which has already shown concern for increase in inflation in the future.
“Some abatement in prices of pulses, potato and sugar through policy measures is very much appreciated; similarly, policymakers should check and address prices of products including paddy that are hovering at higher levels and are also of national importance,” said Rawat.
“Both wholesale and retail prices edged up in the month of October. The increase was led by firming up of food prices with vegetables segment remaining a key stress point at this juncture. However, this is due to adverse weather conditions and the situation should ease out in the coming months,” said President, Ficci, Pankaj Patel.
“Ficci would like to reiterate that under the present scenario inflation targeting by the central bank may not be the best approach. The manufacturing sector is showing signs of recovery and it is important to support this improvement through all policy levers. The high real interest rates remain a challenge for the industry,” he added.

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