News Column

Inflation shoots to 5- month high

June 18, 2014

WHOLESALE price index ( WPI)- based inflation jumped to a five- month high in May adding to the challenges confronting the Narendra Modi government at a time when the prospects of a weak monsoon and the Iraqi quagmire could lead to a further surge in food and fuel prices. WPI inflation was 5.20 per cent in April and 4.58 per cent a year ago in May.

Official figures released on Monday showed that wholesale prices rose faster- than- expected at 6.01 per cent in May mainly on account of a 31.4- per cent increase in prices of potato, 19.4- per cent rise in fruit prices and 12.8- per cent increase in the price of rice. Food inflation worked out to 9.50 per cent during the month while inflation in manufactured goods was 3.55 per cent.

Economist Upasna Bhardwaj of ING Vysya Bank described the acceleration in wholesale prices as "very shocking". "Though it is a broad- based uptick, food prices have surged sharply," said Bhardwaj.

Indicating that increased risk ahead, Barclays ( India) chief economist Siddhartha Sanyal said, "The risks from a poor monsoon and uncertainties around global oil prices due to geopolitical tensions in Iraq remain." "Persistence of the rise in crude oil prices and the weakness in the Indian rupee in the ongoing month could feed through to higher core inflation going ahead," said Icra senior economist Aditi Nayar. "With monsoon- related concerns for the inflation trajectory getting compounded by the recent rise in crude oil prices and the weakness in the INR, measures to address the supply- side causes of high- food inflation have assumed added significance," Nayar added.


Union finance minister Arun Jaitley has said that withholding of food stocks by traders is responsible as well for rising inflation He said that the Centre is committed to ease supply- side bottlenecks and has also asked states to take firm measures against hoarders to check speculation

Jaitley said that the state governments should take effective steps to ensure that hoarding is discouraged

He hopes that inflation, which is moving upwards now, would eventually come down

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Source: Mail Today (India)

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