Wholesale inflation spikes to nine-month high of 3.1%; impact of rise in fuel cost, manufactured food products

Wholesale inflation has spiked to 3.1 percent in January from 2.59 percent in the previous month on higher fuel cost and price rise in manufactured food products, as per government data released on Friday. This is the highest inflation figure in nine months. The similar hike in WPI was earlier recorded at 3.24 percent in April 2019."The annual rate of inflation, based on monthly WPI, stood at 3.1 percent (provisional) for the month of January, 2020 (over January, 2019) as compared to 2.59 percent (provisional) for the previous month and 2.76 percent during the corresponding month of the previous year," the Ministry of Commerce and Industry said in a statement on January''s Wholesale Price Index (WPI)."Build-up inflation rate in the financial year so far is 2.50 percent compared to a build-up rate of 2.49 percent in the corresponding period of the previous year", it said.During the month, fuel inflation rose to 3.4 percent from a decline of 1.5 percent in December 2019.The inflation in manufactured food products inched up to 0.34 percent during the month under review from a decline of 0.25 percent in December 2019, according to the data by the Commerce Ministry.However, food inflation eased to 11.51 percent from 13.24 percent in December 2019 as vegetable prices cooled down. Inflation in vegetables slowed down to 52.72 percent in January 2020 from 69.69 percent in December 2019.Similarly, rise in pulses also softened at 12.81 percent in January 2020 from 13.11 percent in December 2019.[caption id="attachment_4303427" align="alignleft" width="380"]

Representational image. Reuters[/caption]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 percent 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 percent.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 percent while maintaining an accommodative stance.(With PTI inputs)