High food prices push up wholesale, retail inflation

 

“This time, the pick-up in (retail) inflation has been driven by a 140 basis points  jump in food inflation, specifically pulses where the inflation rate touched 46.1 per cent, vegetables and oils and fats. The rise in food inflation is a concern and now crucially depends on a healthy rabi output and active food-supply management by the government,” said rating agency Crisil. An increase in excise duty in petrol and diesel also pushed up retail inflation in transport and communication segments. RBI mainly tracks retail inflation to devise its monetary policy.

 

“The RBI has set itself an inflation target of six per cent by January 2016. We believe despite the recent pick-up in inflation, CPI (retail inflation) will remain within this target. We therefore believe the RBI will keep policy rates unchanged for the rest of this fiscal unless inflation surprises on the downside,” said Crisil. Rating agency ICRA, senior economist Aditi Nayar said that while retail inflation print for November 2015 is modestly higher than expected, it is not a cause for alarm. She said that buildup of retail inflation upto November 2015 remains in line with the trend witnessed in November 2014. 

 

“The expected reversal in prices of some perishables and pulses, the likely softness in global crude oil prices and the waning of the adverse base effect would contribute to keeping retail inflation largely steady at current levels during the remainder of FY 2015-16,” said Ms Nayar.