Inflation touches 30-month high on surging fuel prices

New Delhi: Wholesale inflation jumped to a 30-month high of 5.25 per cent in January due to soaring petrol and diesel prices. Last week RBI had decided not to cut interest rates on fear that inflation will rise in coming days.

Inflation is the highest since July 2014. In December and November, it stood at 3.39 per cent and 3.38 per cent, respectively.

While the wholesale data contrasts to the fall in retail inflation to a five-year low of 3.17 per cent in January, the jump is in line with core retail inflation that strips out volatile food and fuel costs.

“The pass through of higher global prices of commodities such as minerals, metals and fuels into domestic prices, as well as an unfavourable base effect for some sub-groups, pushed up WPI inflation to a higher than expected 5.2 percent in January 2017,” said Aditi Nayar, principal economist, Icra.

She also pointed out that the spike in wholesale inflation in January was primarily driven by the rise in inflation for fuel and power to 18.1 per cent from 8.7 per cent in December 2016, led by higher prices of coal and mineral oils.

“Based on the expected trajectory of food prices, commodity prices and exchange rates, we expect WPI inflation to rise further in February 2017, before easing marginally in March 2017,” she added.

As per the data, food inflation basket  contracted to 0.56 per cent in January,  negative growth second time in a row. Vegetables inflation too contracted  to 32.32 per cent in January, seeing deflationary pressure for the fifth consecutive month. This was helped by a substantial price fall in onions, which stood at minus 28.86 per cent.