WPI inflation at 4 year high: CARE says these 2 factors may further push up prices

By: | Updated: July 16, 2018 5:33 PM

Inflation based on wholesale prices shot up to 5.77 per cent in June on increasing prices of vegetables and fuel items.

A massive jump! WPI inflation rises to whopping 5.77% in June on costlier veggies, fuelInflation based on wholesale prices shot up to 5.77 per cent in June on increasing prices of vegetables and fuel items. (Image: PTI)

Even as wholesale price inflation (WPI) may have surged to 4-year high of 5.77 percent in June, the pressure on prices may continue to remain higher in the coming days as well. The pressure on inflation is likely to continue, driven by global crude oil prices staying at high levels. Further, unfavorable weather conditions and the resultant impact on agriculture output could also push up price levels, CARE Ratings said. “However, the growth in inflation in the coming months is less likely to rise significantly given the favorable base effect. We expect the WPI inflation to moderate to nearly 5% in the coming two months. Thereafter it is likely to decline further and average 4% for the fiscal year as a whole,” CARE Ratings said.

The wholesale price inflation (WPI) surged to more than 4-year high of 5.77 per cent in June pushed by increasing prices of vegetables and fuel items.  The WPI based inflation stood at 4.43 per cent in May and 0.90 per cent in June last year, as per the government data released today.

Since December 2013, inflation is at its highest level when it was at 5.9 per cent. CPI inflation, which the Reserve Bank of India (RBI) takes into account while formulating its monetary policy, had touched a 5-month high of 5 per cent in June. RBI targets to keep inflation at 4 percent, (+/- 2 percent). Any rise beyond this comfort zone will put pressure on the central bank to hike rates.

According to the latest WPI data, inflation in food articles stood at 1.80 percent in June, compared to 1.60 percent in the preceding month. Inflation in vegetables jumped to 8.12 percent last month, from 2.51 percent in the previous month.

Inflation in ‘fuel and power’ basket too rose sharply to 16.18 percent in June from 11.22 percent in May as prices of domestic fuel increased during the month in line with rising global crude oil rates.

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