Wholesale Price Inflation Rises to Over Three-year High of 6.55% in Feb

New Delhi: India's annual rate of inflation based on wholesale prices rose to over a three-year high of 6.55 percent in February owing to costlier food and fuel, from 5.25 percent in the previous month, even as February's retail inflation also climbed over the previous month to 3.65 percent, official data showed on Tuesday.

According to the Wholesale Price Index (WPI) data released by the Commerce and Industry Ministry, the annual inflation rate was (-)0.85 percent in February 2016.

The wholesale inflation for food articles rose by 2.69 percent during the month under review from (-)0.56 percent in January.

However, expenses on primary articles, which constitute 20.12 percent of the WPI's total weight, rose by 5 percent during February.

The wholesale inflation rate for onion was lower by (-)18.85 percent and that for potatoes stood at (-)8.84 percent. Overall, vegetable prices came down by (-)8.05 percent.

The inflation rate for pulses stood at (-)0.79 percent, while wheat became expensive by 8.36 percent and protein-based food items such as eggs, meat and fish became dearer by 3.79 percent.

Prices of manufactured products, which comprise nearly 65 percent of the index, continued to rise by 3.66 percent.

The prices in this category had risen by 3.99 percent in January.

This was mainly caused by a spurt in sugar prices, which rose by 21.22 percent as a result of production shortages. Edible oils rose by 5.70 percent.

Similarly, fuel and power price inflation accelerated in February. It edged up by 21.02 percent, as compared to a rise of 18.14 percent reported during January.

Segment-wise, the price of high-speed diesel rose by 33.14 percent last month while that for gasoline or petrol climbed by 16.72 percent and for LPG by 4.32 percent.

The Commerce Ministry also revised the December 2016 WPI inflation rate to 3.68 percent from the earlier provisional reporting of 3.39 percent.

In this regard, the Reserve Bank of India's six-member monetary policy committee (MPC) was unanimous in its concern about inflation when holding rates in February. At its sixth and final monetary policy review of the fiscal, the RBI kept its short-term lending rate for commercial banks unchanged at 6.25 percent, while changing its policy stance from "accommodative" to "neutral".

MPC members were unanimous in the decision to keep the policy rate unchanged, with all six citing concerns that inflation could quickly accelerate and threaten the RBI's medium-term target of 4 percent.

The minutes of the MPC meeting showed that the committee was of the view that excluding food and fuel, inflation has been unyielding at 4.9 percent since September 2016.

"The Committee is of the view that the persistence of inflation excluding food and fuel could set a floor on further downward movements in headline inflation and trigger second-order effects."

The average level of retail inflation in 2015-16 was at 4.9 percent.