Wholesale inflation rises to 27-month high in February

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Ziraat Times
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New Delhi, March 15: The wholesale price index-based inflation doubled to a 27-month high in February, led by soaring fuel prices and an uptick in food prices. This effectively dims hopes for any policy rate reduction in the near term to spur economic growth amid the pandemic.

Wholesale inflation rose to 4.17 per cent in February as against 2.03 per cent in the previous month, data released by the ministry of commerce and industry showed on Monday. Its retail price counterpart, consumer price index released on Friday, also saw inflation surge to a three-month high of 5.03 per cent in February, on the back of sharp rise in petrol and diesel prices.

“The doubling in the WPI inflation to a 27-month high was fairly broad-based, reflecting the rise in commodity prices brought on by the global risk-on sentiment, hardening of crude oil and fuel prices, as well as a fading of the favorable base effect for food items,” said Aditi Nayar, principal economist, ICRA Ratings who expects large upticks in the WPI inflation over the next three months with core and headline WPI rising to around 6 per cent in March.

“We maintain our view that inflation dynamics will rule out any further rate cuts, with a status quo expected through 2021,” added Nayar.

Food index in February 2021 rose to 3.31 percent, compared to a 0.26 per cent contraction seen in the previous month. Inflation in pulses remained elevated at 10.25 per cent, while that for fruit shot up significantly to 9.48 per cent.

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