NEW DELHI: High cost of food and fuel items pushed inflation up by 6.55 per cent based on wholesale prices in February — a 39-month high. Consumer price index-based inflation too rose to a four-month high of 3.65 per cent, as remonetisation pace picked up pace and spurred consumption demand, after touching a multi-year low of 3.17 per cent in January “However, the sharp correction in crude oil prices witnessed over the past week would douse minerals inflation in March 2017, restraining headline wholesale price index-based (WPI) inflation at around six per cent in that month,” says Aditi Nayar, principal economist, ICRA.
WPI is an index that measures and tracks the changes in the price of goods in the stages before the retail level. WPI shows the average price change of goods included in the index and is often expressed as a ratio or percentage, and the change is one indicator of a country’s level of inflation. The WPI inflation reflected that the annual rate of price rise was at 5.25 percent in January. This was primarily because of a sharp rise in the rates of cereals, rice and fruits. The fuel basket also surged by 21.02 per cent from 18.14 per cent in January.
“We had expected an adverse base effect to push up WPI inflation in February 2017 to 5.9 per cent. The lagged revision in the minerals sub-index, particularly for crude oil, contributed to the sharper-than-anticipated spike in WPI inflation to 6.5 per cent in February 2017, as well as the upward revision in the December 2016 print to 3.7 per cent,” said Nayar.
Food prices indicated a sharp rise by 2.69 per cent in February compared to a deceleration by 0.56 per cent in the previous month, according to the official data released on Tuesday. “Everything on the agriculture front is not good as some of the southern states have declared drought,” said Rupa Rege Nitsure, L&T Financial Services.
The report gives an impression that food inflation in the months of October, November, December-2016 and January 2017 had crashed and that food inflation has bottomed out. The government also revised December inflation rate to 3.68 per cent from the previous provisional reporting of 3.39 per cent.