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WPI inflation eases to 22-month low of 2.45 per cent in May

The Wholesale Price Index (WPI)-based inflation was at 3.07 per cent in April. It was 4.78 per cent in May 2018.

ET Bureau|
Updated: Jun 15, 2019, 12.05 AM IST
WPI inflation data for March has been revised downwards to 3.10 per cent from provisional 3.18 per cent.
NEW DELHI: Inflation measured by the wholesale price index eased to a 22-month low in May, driven down by manufactured items and fuel where prices have cooled.

Food inflation, however, remained high with cereals including jowar, bajra, maize and pulses witnessing double-digit inflation for the fourth consecutive month. Vegetable and onion prices increased by 33.2% and 15.9%, respectively, compared with May last year.

The decline in the wholesale inflation rate to 2.45% from 3.07% in April suggests that retail inflation, which hit a seven-month high at 3.05% in the past month, may come down going ahead.


“There is a slowdown in demand and that is the reason that core inflation is going down … however, most of the adjustment is through fuel and not core,” said Indranil Pan, chiInef economist at IDFC Bank, adding that both consumer and retail inflation numbers pointed to weak levels of demand in the economy.

India’s economic growth slumped to a five-year low of 6.8% in fiscal 2019. The Reserve Bank of India last week cut its key policy rate by 25 basis points, the third such reduction this year, to give a boost to demand. The RBI had also revised its policy stance form neutral to accommodative.

The central bank will have one more set of inflation numbers before the next policy review on August 7. Sunil Kumar Sinha, principal economist at India Ratings & Research, expects more rate cuts from the RBI going ahead to revive demand.

“Core inflation at 1.2% is a 29-month low in May 2019. This is clearly an indication of the weakening of demand impulse in the economy. Dwindling auto and FMCG sales growth has been pointing towards this for the past several months,” said Sinha.

Inflation in the fuel and power category cooled to 0.98% from 3.84% last month, data released by the government on Thursday showed. Manufactured items saw a decline in inflation rate at 1.28% in May against 1.72% in April. Food inflation remained elevated at 7% in May, though was down from a 33-month high of 7.4% in the previous month.

The government revised downwards the WPI for March to 3.1% from the provisional rate of 3.18% announced earlier.

IDFC Bank’s Pan felt that the relatively high inflation in food was a mean correction from a recent trend of low readings.

“It is good that the food articles prices are going up because the terms of trade have been adverse for these food articles for a significant period of time which is manifesting in farmers distress,” said Pan, adding that the price rise for food items at these levels was not a major concern given the fact that prices had remained low in the recent past.

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