WPI inflation hits 3-month high in March on costlier food, fuel

NEW DELHI: Annual wholesale price inflation (WPI) jumped in March to its highest level in three months on the back of a spurt in prices of food and fuel, posing a fresh challenge for policymakers to remain watchful on the price front.


Official data released on Monday showed inflation, as measured by the wholesale price index, rose an annual 3.2% in March, higher than previous month’s 2.9% and above 2.7% posted in the same month a year earlier .

“Like previous month, once again higher food inflation — in combination with fuel and power — provided impetus to the wholesale inflation. As a result, it inched up to 3.2% in March 2019 as compared to 2.9% previous month,” said Sunil Kumar Sinha, principal economist, India Ratings and Research.

“The bigger push, however, came from food articles where several items namely wheat, jowar, bajra,

maize

,

barley

have been witnessing double-digit or near double-digit inflation since November 2018. Pulses also recorded second consecutive month of double-digit inflation in March 2019. Within pulses, Arhar and moong have now witnessed four months of consecutive double-digit inflation,” said Sinha.

He said a fresh interest rate cut by the RBI would largely depend on how the monsoon pans out in the months ahead. The WPI data showed food prices rose an annual 5.7% in March, picking up pace from previous month’s 4.3% increase.

Prices of vegetables rose 28% compared to previous month’s 6.8%. Onion prices contracted 31.3% in March.

Fuel and power prices increased 5.4% in March, accelerating from previous month’s 2.2% rise. “We see headline CPI inflation averaging approximately 3.8% for FY20 (3.4% in FY19), but do reckon several uncertainties that

cloud

the outlook, namely monsoons, crude prices, global volatility, stillhigh

core inflation

and effective fiscal stance,” said Madhavi Arora, economist at Edelweiss Securities. “We are in consonance with the RBI on nearterm inflation dynamics and see another 25bps cut in first half of FY20, most possibly in June itself, especially amid current global goldilock situation. The bar for further cuts will be a much higher and will be data-dependent. We see upside risks to RBI’s inflation trajectory in latter part of FY20 and will closely watch out for the evolution of inflation amid various domestic and global idiosyncrasies and fiscal fragilities,” Arora added.

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