WPI inflation spikes to 39-month high of 6.55% in February

The CPI rose to a 4-month high of 3.65 per cent in February after touching a multi-year low of 3.17 per cent in the previous month. Photograph:( Reuters )

PTI Delhi, India Mar 14, 2017, 02.39 PM (IST)

Wholesale inflation soared to a 39-month high of 6.55 per cent in February and retail inflation inched up to 3.65 per cent due to rise in food and fuel prices, justifying the RBI's move to hold rates in last policy meet.

However, the prices of vegetables and pulses remained subdued during the month, giving some relief to consumers, showed the data released by the government today.

The Wholesale Price Index (WPI) based inflation in January was at 5.25 per cent, while the consumer inflation stood at 3.17 per cent.

The rising inflation is likely to refrain the Reserve Bank from cutting interest rates in its next monetary policy review on April 6.

According to the WPI data, food inflation witnessed a sharp 2.69 per cent rise in February, while the fuel basket surged by 21.02 per cent.

Although the inflation rates of cereals, rice and fruits witnessed an increase, vegetables prices declined by 8.05 per cent during February.

The December WPI inflation rate was revised upwards to 3.68 per cent from the previous 3.39 per cent.

As regards the CPI, it rose to a 4-month high of 3.65 per cent in February after touching a multi-year low of 3.17 per cent in the previous month.

Food inflation at the retail level was recorded at 2.01 per cent, while that in fruits was higher at 8.33 per cent, and fuel and light at 3.9 per cent in February. The rate of price rise in meat and fish was 3.5 per cent.

Prices of sugar and confectionery items rose by 18.83 per cent in February while inflation in milk and milk product increased by 4.22 per cent.

The rate of inflation in household goods and services was 4.09 per cent, while it stood at 4 per cent in health segment. The transport and communication became expensive by 5.39 per cent.

ICRA Principal Economist Aditi Nayar said the likelihood of a repo rate cut by the RBI in April 2017 remains subdued, given its focus on bringing inflation to 4 per cent in a durable manner.

"CPI inflation is expected to rise to above 4.5 per cent in March 2017, as the base effect continues to unwind and prices of perishables track a seasonal uptrend," Nayar said.

Industry chamber Assocham said the RBI need not get excessively worried about rising WPI and the easing of the interest rate cycle should continue, because the latest WPI inflation does not indicate any improvement in the pricing power of the manufacturers.