Veggies get costly, push up WPI inflation

Inflation based on the wholesale price index (WPI) jumped to 0.79 per cent in May as food prices doubled, hitting the common man. Retail inflation, too, had jumped to a two-year high of 5.76 per cent in May due to costlier food and fuel products.

As per WPI data, food inflation rose to 7.88 per cent in May as against 4.23 per cent in April. It could rise further as after pulses, tomato prices too have risen sharply across India in June, selling at a price of around `80 per kg in South India. In May, it was selling `20-30 per kg. Inflation in vegetable prices stood at 12.94 per cent in May, a sharp rise from 2.21 per cent a month earlier. Inflation in the price of pulses was still high at 35.56 per cent in May despite several measures taken by the government. Prices of potatoes also rose by a dramatic 60 per cent in May. Egg, meat and fish, sources of protein, became costlier by 10 per cent in May.

The RBI in its recent policy had refused to cut interest rates on fears that food inflation would in the coming months. It seems that till food inflation does not come down, there is no chance of the RBI cutting interest rates.

“While the month-on-month hardening in prices of vegetables and pulses in May 2016 was along expected lines, the sizeable and fairly broad-based rise in the sub-index for cereals was unexpected,” said ICRA’s Aditi Nayar.