Inflation surges as food and fuel prices rise

New Delhi, March 14 (IANS) A rise in food and fuel prices as well as base effect led to uptrend in the two main inflation gauges of Wholesale Price Index (WPI) and Consumer Price Index (CPI) for February, official data showed on Tuesday.

The annual rate of inflation based on wholesale prices released by the Commerce and Industry Ministry rose to over a three-year high of 6.55 per cent in February owing to costlier food and fuel -- up from 5.25 per cent in the previous month.

Similarly, February's retail inflation released by the Central Statistics Office (CSO) edged up to a four-month high of 3.65 per cent from 3.17 per cent reported for the previous month.

The upward trend in both inflation gauges was led by a surge in food prices. The wholesale inflation for food articles rose by 2.69 per cent, while the CPI food inflation edged higher by 2.01 per cent.

The official annual retail inflation data disclosed that prices of vegetable plunged (-)8.29 per cent on a year-on-year (YoY) basis while cost of pulses and its products was lower (-)9.02 per cent.

However, the prices of milk and milk-based products surged by 4.22 per cent. Other protein-based food items such as meat and fish became dearer by 3.50 per cent.

Besides, eggs became a shade expensive by 0.54 per cent and the cost of spices rose by 3.82 per cent.

Edible oils and fats prices increased by 3.83 per cent while those for sugar and confectionery edged up by 18.83 per cent on a YoY basis.

The cost of cereals and its products appreciated by 5.30 per cent and prices of fruits were up by 8.33 per cent.

Among the states, retail inflation was lowest in Chhattisgarh, at 0.61 per cent, followed by Assam at 1.28 per cent, and Odisha at 1.61 per cent.

On the flip side, it was as high as 7.14 per cent in Jammu and Kashmir, 6.16 per cent in Himachal Pradesh and 6.11 per cent in Delhi.

On WPI basis, the inflation rate for onion was lower (-)18.85 per cent and that for potatoes stood at (-)8.84 per cent. Overall, vegetable prices came down (-)8.05 per cent.

The inflation rate for pulses stood at (-)0.79 per cent, while wheat became expensive by 8.36 per cent and protein-based food items such as eggs, meat and fish became dearer by 3.79 per cent.

Besides, prices of manufactured products, which comprise nearly 65 per cent of the WPI, continued to rise by 3.66 per cent.

The WPI fuel and power price inflation also accelerated in February. It edged up by 21.02 per cent, as compared to a rise of 18.14 per cent reported during January.

Commenting on the inflation numbers, Ficci President Pankaj Patel said: "An uptrend has been noted in both wholesale and retail based inflation rates announced today."

"The pressure was seen arising from the fuel segment. Global crude oil prices will remain under a close watch. Even though food prices have edged up a tad; but with two good crops and a preliminary forecast of normal monsoon in 2017 food prices are expected to remain range bound."

"The WPI inflation rate seems to be one-off particularly because of the base effect and is expected to gradually settle down going ahead," Patel added.

According to Aditi Nayar, Principal Economist at the credit rating agency ICRA, the up tick in CPI inflation in February 2017 was expected given the unwinding of base effect.

"Nevertheless, the likelihood of a repo rate cut by the RBI (Reserve Bank of India) in April 2017 remains subdued, given its focus on bringing inflation to 4 per cent in a durable manner," Nayar said.

"In fact, CPI inflation is expected to rise to above 4.5 per cent in March 2017, as the base effect continues to unwind and prices of perishables track a seasonal uptrend."