“Inflation in the fuel and power segment can be ascribed to the rigidity in international crude oil prices on account of bright prospects for global oil demand outlook and a low-base effect,” Madan Sabnavis, chief economist at CARE Ratings, said. He added that the manufacturing segment was witnessing inflationary pressures because of a strong rally in global metal prices and strengthening pricing power of manufacturers.
Inflation based on the consumer price index (CPI) moderated to 4.29 per cent in April from a four-month high of 5.52 per cent in March, the data released last week showed. However, going forward, retail inflation is likely to witness an uptick amid localised lockdowns imposed across the country to contain the resurgence of Covid-19 cases.
“The likely trajectory of WPI inflation supports our view that there is no space for rate cuts to support the faltering growth momentum, even as we expect the monetary stance to remain accommodative,” ICRA Chief Economist Aditi Nayar said.
“There is a growing divergence in terms of global optimism related to the vaccine roll-out, which is pushing up commodity prices, vs. the weaker domestic sentiment engendered by the continuing impact of the second wave of Covid-19 infections in India,” Nayar said.
Primary articles, which account for more than a fifth of the entire WPI, grew 10.16 per cent in April from (-) 1.08 per cent a year ago, as prices of fruits, eggs, meat, among others, witnessed double-digit inflation.
Prices of fruits and eggs, meat and fish witnessed a jump of 27.43 per cent and 10.88 per cent, respectively. Non-food articles witnessed inflation of 15.6 per cent in April, as against 11.8 per cent in March and deflation of 3 per cent during the same period a year ago. Economists said the rate of price rise was expected to remain high in the coming months owing to a consistent rise in global commodity prices.
“Since global prices of items such as minerals, edible oil, crude oil, coal, fertilisers, plastic, basic metals, electronic items, among others, are mostly a pass-through into domestic prices, a surge in global commodity prices has put significant pressure on the headline wholesale inflation.
In fact, the contribution of these items to the headline wholesale inflation
increased to 72.6 per cent during February-April 2021 from negative 34.4 per cent during September-November 2020,” Sunil Kumar Sinha, principal economist at India Ratings & Research, said.
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.