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  Business   Economy  15 Feb 2017  Inflation touches 30-month high on surging fuel prices

Inflation touches 30-month high on surging fuel prices

THE ASIAN AGE.
Published : Feb 15, 2017, 5:17 am IST
Updated : Feb 15, 2017, 6:27 am IST

In December and November, it stood at 3.39 per cent and 3.38 per cent, respectively.

As per the data, food inflation basket contracted to 0.56 per cent in January,  negative growth second time in a row.
 As per the data, food inflation basket contracted to 0.56 per cent in January, negative growth second time in a row.

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.

Pulse inflation moderated to 6.21 per cent, from 18.12 per cent in December. Potato prices recorded sharp fall contracting by 0.20 per cent, from 26.42 per cent in the previous month. Rate of price increase in egg, meat and fish was 3.59 per cent during January.

“The industrial economy is still weak and there is a need to improve the flow of credit to the manufacturing and infrastructure sectors. We also need to see a further reduction in the lending rates by banks and we hope that RBI’s guidance on this to the banks will be followed up in the form of further reduction in rates for companies,” said Pankaj Patel, President, FICCI.

Tags: inflation, rbi, ficci