Two-year high inflation welcomes new RBI Governor

Wholesale Price Inflation (WPI) soared to a two-year high of 3.74 per cent in August mainly on account of an uptick in prices of pulses and some manufactured items, prompting the industry to step up its demand for structural reforms to deal with the price situation.

 

Experts, however, attributed the rise in WPI inflation during the month to low base effect saying it was (-)5.06 per cent in August 2015.

 

The wholesale price-based inflation, reflecting the annual rate of price rise, in July, stood at 3.55 percent.

 

WPI inflation, which was in the negative zone from November 2014 to March 2016, has been on an upward trend for a seventh straight month.

 

The earlier high in WPI inflation was recorded at 3.74 percent in August 2014.

 

However, overall, the food inflation basket showed some moderation with inflation at 8.23 per cent in August, against 11.82 per cent in July as vegetable prices cooled.

 

Inflation in vegetables came down to 0.17 percent in August, from a spike of 28.05 percent in July.

 

Pulses inflation continued to rule high at 34.55 percent in August, according to the Commerce Ministry data.

 

Potato, a daily consumable vegetable, saw the price rise during the month at 66.72 per cent. For the onion, it was (-)64.19 per cent.

 

The rate of inflation in sugar was at 35.36 percent, and that for fruits rose by 13.91 per cent during the month.

 

"The pick-up in wholesale inflation was broadly in line with our expectation, with an adverse base effect outweighing the cooling effect of lower food inflation," ICRA Senior Economist Aditi Nayar said.

 

Assocham said prices of products like pulses, potato and fibres, which are of national interest, has been rising at the industry level, but the recent concern is sugar which has started to grow at a much higher rate which policy makers should address using supply side responses.

 

"Government should take steps to address the structural issues of demand and supply within the industry to maintain the inflation within the target range continuously for at least six months," Assocham said.