WPI falls to 5.7 per cent even as food prices heat up

New Delhi: Diverting from retail inflation, wholesale inflation (WPI) fell to 5.70 per cent in March from 6.55 per cent in the previous month. Last week data had showed that retail inflation based on consumer price index (CPI) had jumped to five month high to 3.81 per cent in March. “Both indexes have different weights for commodities like CPI gives high weightage to food as it impacts people more, while WPI gives manufactured products 64 percent weightage so there is bound to be some differences,” said a senior economist from a rating agency.

Wholesale inflation came down due to decrease in prices of manufactured products and fuel in March. However, food inflation in March jumped to 3.12 per cent last month compared to 2.69 per cent in February. SBI (economic research department) chief economic adviser Soumya Kanti Ghosh said currently wholesale food inflation is marginally higher than CPI food, which is against the normal trend. This had earlier happened between July 2016 and November 2016.

“One possible reason for this, could be in a situation of bumper harvest, farmers may not get adequate remuneration for their crops as is happening with potato and tomato now. If this is the case, CPI food could well stay below WPI food in coming months thus pulling down headline CPI in the process,” said Mr Ghosh. Retail vegetable inflation in March had contracted by 7.24 per cent in March 2017 but wholesale inflation jumped by 5.70 percent. Overall, retail food inflation was at 1.93 per cent in March as against 2.01 per cent in February.

“The month on month spike in wholesale vegetable prices in March 2017 was sharper than that seen in the month of  March in the past five years, and may transmit into higher retail prices in the ongoing month (April),” said Icra, principal economist Aditi Nayar. She said going forward, monsoon dynamics would dictate the trend in food inflation, particularly for kharif crops.