With the trend of rising prices, country's retail inflation or consumers inflation rose to 4.58% in April, while at the same time, skyrocketing petrol and diesel prices as well as costlier fruits and vegetables items also pushed the wholesale prices a four-month high of 3.18% in the same period, according to Central Statistics Office (CSO) data released on Monday. This upward trend of price rise may prompt the Reserve Bank of India (RBI) to harden stance at the monetary policy review next month.
The Wholesale Price Index (WPI) based inflation too rose to 3.18% in April mainly on account of spike in fuel prices, as per inflation data released by the Government. The hardening of inflation, both retail and wholesale, comes weeks ahead of RBI's Monetary Policy Committee (MPC) meet on June 4 and 5.
Retail inflation, based on movement in Consumer Price Index (CPI), rose after declining since January on account of rise in prices of cereals, meat, fish and fruits. As per the Government data, retail inflation was 4.28% in March and 2.99% in April last year.
As far as wholesale inflation is concerned, it stood at 2.47% in March and 3.85% in April last year. The WPI inflation, which was on a declining trend since December 2017, accelerated in April due to an unfavourable base effect, a seasonal uptick in food prices as well as the pass through of rising global crude oil prices. Inflation in December was 3.58%.
In the fuel and power basket in WPI, petrol inflation spiked to 9.45% in April from 2.55% in March, while diesel jumped to 13.01% from 6.12% in the previous month.
A global rally in crude prices pushed up domestic fuel prices, with petrol at Rs 74.80 per litre and diesel at a record high of Rs 66.14 a litre. The WPI inflation for February was revised upwards to 2.74% from the provisional estimate of 2.48%.
With the spike in prices, Indian industry feel that the breakdown of the April inflation data shows annualised inflation of close to 10% for petrol and over 13% for high speed diesel. “Even more worrying is the fact that these levels are on a very high base in the same month last fiscal. Going forward, increasing crude oil prices and their cascading impact would be one of the key worry areas for Indian economy,” Assocham Secretary General DS Rawat said. PHD Chamber of Commerce President Anil Khaitan too termed it worrisome and hoped that prices do not increase further in the coming months. However, economists said that the price rise was expected to continue to rise over the remainder of this quarter.
“The Government may prefer to wait for additional information about the level at which the monthly GST revenues stabilise after the e-way bill introduction, before reducing excise duty on fuels,” said ICRA Principal Economist Aditi Nayar.
“Key factors that would influence the inflation trajectory include the level at which global crude oil prices stabilise and the extent to which they are transmitted to domestic fuel prices, the early trend in the monsoon dispersion and the extent of change in MSPs,” Nayar added.
According to the Government data released, inflation in food articles was at 0.87% in April 2018, as against a deflation of 0.29% in the preceding month. Deflation in vegetables was 0.89% in April, while in the previous month it was 2.70%.
Inflation in fruits was in double digits at 19.47% in April, up from 9.26% in March. Inflation in fuel and power basket also rose sharply to 7.85% in April from 4.70% in March as prices of domestic fuel increased in line with rising global crude oil rates.
In its first monetary policy review for the fiscal, the RBI last month maintained status quo on interest rate citing inflationary concerns. The RBI mainly takes into account retail inflation data, which is slated to be released later in the day, while formulating monetary policy.
The central bank revised downward forecast for retail inflation to 4.7-5.1% for April-September and 4.4% for October-March.