Rise in Food Prices Accelerates India’s Wholesale Price Inflation

FMT-INDIA

An exponential rise in food prices accelerated India’s annual rate of inflation based on wholesale prices to 3.59 percent in October.

Cost of food in India increased 1.90 percent in October of 2017 over the same month in the previous year. Food Inflation in India averaged 7 percent from 2012 until 2017, reaching an all-time high of 14.72 percent in November of 2013 and a record low of -2.12 percent in June of 2017.

An exponential rise in food prices accelerated India’s annual rate of inflation based on wholesale prices to 3.59 percent in October.

According to data from the Ministry of Commerce and Industry released on Tuesday, the wholesale price index (WPI), with the revised base year of 2011-12, went up in October to 3.59 percent from 2.60 percent in September.

Reacting to the data, India Inc. said the rise in inflation was in line with the industry’s expectations owing to factors like marginal rise in demand together with an increase in prices of crude oil and other commodities globally. However, it also said the policymakers should take corrective measures to address the challenges.

On a segment-wise basis, the expenses on primary articles, which constitute 22.62 percent of the WPI’s total weightage, edged higher by 3.33 percent from an increase of 0.15 percent in September 2017.

The prices of food articles rose by 4.30 percent from an acceleration of 2.04 percent during September 2017 and a rise of 2.98 percent in October 2016.

In terms of food prices, the YoY (Year-over-year) wholesale inflation rate for onion was higher by 127.04 percent, whereas for potatoes it plunged by (-) 44.29 percent.

In contrast, the overall vegetable prices in October rose by 36.61 percent, against a fall of (-) 11.84 percent in the same month a year ago.

As per data, wheat became cheaper by (-) 1.99 percent on YoY basis and the prices of pulses came down by (-) 31.05 percent, but paddy became dearer by 3.10 percent.

Protein-based food items such as eggs, meat and fish became expensive by 5.76 percent during the month under review.

Prices of other major groups under the WPI, manufactured products, which comprise nearly 64.23 percent of the index, recorded a 2.62 percent rise.

The sub-category of manufactured food products registered a rise of 1.26 percent.

Fuel and power prices accelerated by 10.52 percent.

Product-wise, the price of high-speed diesel rose by 15.43 percent during October while that for petrol climbed by 12.87 percent and for LPG by 26.53 percent.

This is the second macroeconomic inflation data point for October that has shown a surge in prices.

The consumer price index (CPI) inflation for October rose to 3.58 percent from 3.28 percent reported for September.

The CPI inflation last month on a YoY basis was lower than 4.20 percent recorded in October 2016.

The overall food prices, as gauged by the Consumer Food Price Index (CFPI), rose to 1.90 percent during the month under review from 1.25 percent in September 2017.

“The policymakers must take corrective action to address challenges being faced by the industry — rising interest rates, twin balance sheet, limited investment capacity and others,” said Assocham Secretary General D.S. Rawat.

He also stated that rise in WPI numbers may have a corresponding upward impact on CPI (Consumer Price Inflation) which may limit the possibility of a rate cut by the Reserve Bank of India (RBI), which has already shown concern for the increase in inflation in the future.

“Some abatement in prices of pulses, potato and sugar through policy measures is very much appreciated; similarly, policymakers should check and address prices of products including paddy that is hovering at higher levels and are also of national importance,” said Rawat.

“Both wholesale and retail prices edged up in the month of October. The increase was led by firming up of food prices with vegetable segment remaining a key stress point at this juncture. However, this is due to adverse weather conditions and the situation should ease out in the coming months,” said Ficci President Pankaj Patel.

“Ficci would like to reiterate that under the present scenario inflation targeting by the central bank may not be the best approach. The manufacturing sector is showing signs of recovery and it is important to support this improvement through all policy levers. The high real interest rates remain a challenge for the industry,” he added.

 

(Post Source: IANS feed)

 

 

 

 

 

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