WPI nose-dives to -2.06%; fall in core inflation a concern

WPI nose-dives to   -2.06%; fall in core inflation a concern

The wholesale price inflation in February declined to an all time low at  (-)2.06 per cent backed by lower oil, food and manufactured goods items. This is the fourth consecutive month of fall in wholesale prices.

The price rise in vegetables especially onions, potato as well in grains and protein-rich items were less in February as compared with January, the government data showed. Fruits and milk too witnessed lower price rise as compared with last month.

While inflation in food articles category stood at 7.74 per cent, the manufactured products category inflation stood at 0.33 per cent. Inflation in vegetables came down to 15.54 per cent in February from 19.74 per cent in the previous month.

Inflation in fuel and power segment declined to (-)14.72 per cent in February as against (-)10.69 per cent in previous month. While the decline in prices of food and fuel prices were on expected lines, the concern emerged from  the decline of core inflation, which denotes demand side pressures in the economy.

The decline in prices of manufacturing goods points to fragile demand conditions and indicates that robust recovery has yet to set in despite the improved industrial performance evidenced last month.

Industry body CII  hoped that the forthcoming monetary policy would continue to be supportive of growth. “CII is hopeful that the RBI would cut policy rates by 100 bps during the course of the year,” it said in a statement.

The WPI inflation numbers would be taken into account by the RBI for formulating its next monetary policy announcement, scheduled on April 7.

The RBI had lowered policy rates by 0.50 per cent between January-March to prop up growth as it saw inflationary pressure easing.

Ficci expressed concerns about unseasonal rains affecting food prices. “The unseasonal rains seen in the recent past have had an impact on prices of these commodities and this calls for further strengthening of the supply side measures for dealing with food inflation. In this context we expect states to create a unified national agriculture market,” states Ficci.

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