After 17 months, WPI inflation is positive at 0.34%

The Dollar Business Bureau

After a gap of 17 months, the inflation based on Wholesale Price Index (WPI) has turned positive in the month of April this year. It has exceeded the industry expectations to be mildly negative, following a sharper than anticipated rise in food and core inflation. The WPI inflation for the last month rose up to 0.34% over -0.85% in March and -2.43% during the same month in the previous year, as per the data released by the Ministry of Commerce & Industry on Monday.

Aditi Nayar, Senior Economist at ICRA said that wholesale primary food prices registered 2% growth in April 2016 when compared to upsurge of 1.9% in 2014 and 1.5% in 2015. The trend of falling prices of pulses on a month-to-month basis was arrested in April 2016 after a gap of four months, disregarding the growth in rabi output indicated by the Third Advance Estimates. Manufactured food products also displayed a sharp rise in inflation in April 2016, led by sugar, tea & coffee and oils.

The index level for crude petroleum remained flat at 144.4 for April 2016 in line with the revised level for February 2016, though there is 27% increase in the average price of the Indian crude oil to Rs.2,645/barrel in April 2016 from Rs.2,088/barrel in February 2016. ICRA expects subsequent upward revisions in the sub-index level for crude oil for March 2016 and April 2016.

Harshavardhan Neotia, President of FICCI said that while the latest monsoon forecast shows a delay by about a week, the meteorological department’s prediction would offer reprieve in the coming months. The industry performance is more concerned with latest numbers having similar growth in March 2016. As the Reserve Bank of India (RBI) is keeping a close watch on the ground situation, more accommodative stance in the June policy is expected.

Expressing similar views, the President of another industry body ASSOCHAM, Sunil Kanoria said WPI was likely due to the commitment shown by the Centre to support industry along with the RBI policy stance to cut interest rates to boost funding and credit cycle. Price of products of national interest including pulses, food articles, cereals, and wheat have been increasing, the policymakers must address this through supply side responses, he said.