Spike in vegetable prices pushes inflation to 0.79% in May

A double-digit spike in vegetable prices pushed the wholesale price-based inflation to 0.79 % in May, prompting the industry to demand policy action for addressing supply side constraints.

With the firming up of both wholesale and retail inflation the Reserve Bank of India (RBI) may delay the interest rate cut despite a sluggish industrial output.The April WPI-based inflation was at 0.34% and in March it was (-) 0.45% while it stood at (-)2.20% in May last year.Inflation in vegetables stood at 12.94 per cent, a sharp rise from 2.21 per cent, a month earlier. Pulses inflation remained stubborn at 35.56 per cent.

Food inflation rose to 7.88 % in May as against 4.23%  in April, a government data showed. "Policymakers need to address through supply side responses the continuous rise in prices of commodities like pulses, food articles, cereals, wheat and other items," Assocham Secretary General D S Rawat said.

Experts said a favourable base effect and a good monsoon would lead to some dip in wholesale food inflation in the immediate term."The trajectory of the WPI inflation would be shaped by global commodity price movements. If crude oil prices sustain at current levels, average WPI inflation is likely to exceed 3% this fiscal," ICRA Senior Economist Aditi Nayar said.

As per the data, manufactured products inflation too inched up to 0.91% from 0.71% in April. Fuel and power inflation was (-)6.14% in May.The hardening of WPI food inflation follows the trend of retail inflation, released yesterday. RBI mainly takes into account retail inflation while formulating monetary policy.Retail inflation touched a 21-month high of 5.76% in May mainly due to rising prices of food items.

• RBI
• inflation