Food, fuel prices push wholesale, retail inflation

NEW DELHI: Rising fuel and food prices pushed retail inflation to a six-month high of 6.3% in May, breaching Reserve Bank of India’s targets, government data released on Monday showed. This is way above the projected levels, implying that the impact of the localised Covid-19 restrictions was more severe than expected.

“The month-on-month uptick in the CPI in May 2021, which saw widening state-level restrictions, is nearly as high as the hardening seen in April 2020 during the nationwide lockdown, testing the assumption that supply disruptions have been limited in the second wave,” said Aditi Nayar, chief economist, ICRA Ltd.

According to data by the Ministry of Statistics and Programme Implementation, food inflation shot up to 5.01% in May from 1.96% in April. While vegetable prices softened, fruit price zoomed 12% and the cost of pulses and products rose 9.4%. Even the prices of non-alcoholic beverages rose 15%.In non-food items, the rise was steep in fuel and light, registering an inflation of 11.6%, and transport and communication at 12.4%.

With wholesale price index (WPI)-based inflation also touching a whopping 12.94% – the highest since 2013 – experts warn that inflation will worsen in the coming months. WPI-based inflation in May was pushed by fuel and power basket, which shot up to 37.6% in the month against 20.94% in April due to hardening global commodity prices. 

“If wholesale prices are rising, eventually it will start finding its reflection in retail inflation as well,” said Sunil Kumar Sinha, principal economist with India Ratings and Research. He warned that this trend will make things worse for the RBI.