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  Business   Economy  16 Oct 2018  Inflation hits 5.13 per cent on hardening of food price

Inflation hits 5.13 per cent on hardening of food price

THE ASIAN AGE.
Published : Oct 16, 2018, 2:40 am IST
Updated : Oct 16, 2018, 2:40 am IST

The Reserve Bank uses retail inflation data to set the monetary policy in the country.

Since it takes time for transmission of inflation from wholesale to retail level, retail inflation may also rise in coming months.
 Since it takes time for transmission of inflation from wholesale to retail level, retail inflation may also rise in coming months.

New Delhi: After falling for two consecutive months, wholesale inflation, which stood at 3.14 per cent in September last year, rose to 5.13 per cent due to hardening of food prices and rise in cost of petrol and diesel in September.

Retail inflation, which was released last week, too had risen marginally to 3.77 per cent in September owing to higher fuel and food prices but was short of the Reserve Bank of India’s 4 per cent medium-term target.

The Reserve Bank uses retail inflation data to set the monetary policy in the country.  Since it takes time for transmission of inflation from wholesale to retail level, retail inflation may also rise in coming months.

According to the government data released Monday on wholesale, food articles witnessed hardening of prices with deflation at 0.21 per cent September as against a deflation of 4.04 per cent in August.

Deflation in vegetables was 3.83 per cent in September, compared to a deflation of  20.18 per cent in the previous month, indicating relative rise in prices. However, potato saw a 80 per cent inflation in September against an inflation of 71 per cent in August.

Inflation in ‘fuel and power’ basket in September was 16.65 per cent. Individually, in petrol and diesel it was 17.21 per cent and 22.18 per cent, respectively, and for LPG it was 33.51 per cent.

“Sequentially, out of three major groups, primary articles inflation increased sharply in September and fuel and light, and manufactured inflation moderated in September,” said Dr Devendra Kumar Pant, Chief Economist and Senior Director (Public Finance), India Ratings and Research. He said that non-food manufacturing growth moderated consecutively in second month; even in CPI (retail) inflation the same trend was observed.

“However, it has remained more than 4 per cent in last five months. It suggests though the demand conditions in the economy have remained strong the pace of demand growth is gradually declining,” said Dr Pant.

He said that prevailing market price for most kharif crops at major mandi’s has remained lower than the minimum support price (MSP), suggesting procurement hasn’t picked up.

“The future inflation trajectory would depend on the response of mandi prices with respect of new MSP, and the movement of crude oil price and value of currency,” he added.

Tags: wholesale inflation, retail inflation