Wholesale inflation inches up in April
India’s wholesale inflation grew 0.34% in April, snapping a 17 month declining trend driven by costlier food items such as pulses, potato and sugar, latest price data released Monday showed.business Updated: May 16, 2016 13:10 IST
India’s wholesale inflation grew 0.34% in April, snapping a 17 month declining trend driven by costlier food items such as pulses, potato and sugar, latest price data released Monday showed.
Wholesale inflation had eased (-) 0.85% in March, and the price data comes a day after the weather office in an updated forecast said that the monsoon’s onset this year could be delayed by a week.
Wholesale inflation rates, a marker for price movements in bulk buys for traders, broadly mirrored trends in retail prices over the last few months.
Data released last week showed that retail inflation rate rose to 5.39% in April snapping a three-month easing trend driven by costlier food.
A high inflation rate will likely weaken the chances of an interest rate cut in the Reserve Bank of India’s (RBI’s) monetary policy review next month.
Retail inflation was 4.83% in March.
This year’s monsoon rains are critical for prospects of the broader economy, still smarting under the effects of two years of back-to-back drought.
Normal rains act as a strong check on inflation through plentiful food stocks, a patchy monsoon this year could play spoilsport to the Indian economy’s recovery by threatening to crimp food output and raise prices.
Wholesale prices of pulses, a key source of protein for most Indians, shot up 36.36% in April from 34.45% in March. Prices of pulses are now at a five-year high in some parts of the country hit by storms last spring and successive droughts.
Since India relies on imports to meet its entire domestic demand, any weather shock results in a big jump in prices.
Likewise, wholesale potato prices jumped 35.45% in April from 3.57% in March and sugar prices rose 16.07% last month from 6.19% in the preceding month.
Last month, the RBI cut its key interest rate—the repo rate-- to a five-year low of 6.5%, a move that should eventually lead to lower borrowing costs for buying houses and cars.
Experts said that RBI was unlikely to announce another round of rate cuts in the immediate future.
“Given that the RBI faces a tough challenge in meeting its medium-term retail inflation targets, the scope for further policy loosening looks limited,” said Shilan Shah, India Economist at Capital Economics, a research firm.