Retail, WPI inflation accelerate

Time & Us
Last Updated: August 16, 2017 at 3:19 am

Retail inflation as measured by the consumer price index (CPI) accelerated to 2.36% in July after easing for three straight months.
The gains in retail prices were driven by a hardening of prices in sugar and confectionery items, pan, tobacco and intoxicants. However, there was disinflation in the food basket.
The Reserve Bank of India (RBI), which factors in CPI for arriving at its monetary policy, had earlier this month slashed the key interest rate (repo rate) by 25 basis points to 6%.
Separately, skyrocketing tomato prices propelled inflation at the wholesale level to 1.88% in July from 0.9% in June, with the food category overall contributing significantly to the uptick in WPI terms.
Inflation in the food segment of the primary articles category in July came in at 2.15%, snapping a two-month contraction. Within this, the fruits and vegetables segment contributed the most, with inflation coming in at 29%.
‘Seasonal, temporary’
Tomatoes witnessed blistering inflation of more than 209% in July, compared with a contraction of 29.4% in June, according to data with the Centre for Monitoring Indian Economy (CMIE). Brinjal, too, witnessed a sharp acceleration in inflation to 21.1% in July, from the previous month’s contraction of 3.1%. Okra ( Bhindi ) saw inflation at 32.4%.
“What we have to recognise is that these are seasonal influences and are therefore temporary in nature,” D.K. Srivastava, chief policy advisor at EY India, said. “We must look at core WPI inflation and see if there are any factors pushing it up. Otherwise, this increase will subside shortly. As far as fuel is concerned, there has not been any significant movement in crude oil prices, so that wouldn’t put any pressure in either direction,” Mr. Srivastava said.
“The index for ‘Food Articles’ group rose by 6.2%… due to higher price of fruits and vegetables (29%), peas/chawali (6%), ragi (4%) and condiments & spices, barley, poultry chicken and paddy (1% each),” the government said in its release. Inflation in the minerals segment of the primary articles category accelerated to 24.8% in July from a contraction of 2.02% while manufactured products saw a marginally lower 2.18% compared with June’s 2.27%, marking the sixth month of slowing inflation in the segment.
“Wholesale-based prices have edged up in the month of July on back of sharp increase noted in vegetable prices,” Pankaj Patel, president, FICCI, said in an email.
“However, the broad conditions for agri prices remain conducive.”