A double-digit spike in vegetable prices pushed the wholesale price-based inflation for the second straight month in May this year. It prompted the industry to demand policy action for addressing supply side constraints.
With the firming up of both wholesale and retail inflation the Reserve Bank may delay the interest rate cut despite a sluggish industrial output.
The April WPI-based inflation was at 0.34 per cent and in March it was (-)0.45 per cent while it stood at (-)2.20 per cent in May last year.
Inflation in vegetables stood at 12.94 per cent, a sharp rise from 2.21 per cent, a month earlier. Pulses inflation remained stubborn at 35.56 per cent.
Food inflation rose to 7.88 per cent in May as against 4.23 per cent in April, a government data showed.
“Policymakers need to address through supply side responses the continuous rise in prices of commodities like pulses, food articles, cereals, wheat and other items,” Assocham Secretary General D S Rawat said.
Experts said a favourable base effect and a good monsoon would lead to some dip in wholesale food inflation in the immediate term.
“The trajectory of the WPI inflation would be shaped by global commodity price movements. If crude oil prices sustain at current levels, average WPI inflation is likely to exceed 3 per cent this fiscal,” ICRA Senior Economist Aditi Nayar said.
As per the data, manufactured products inflation too inched up to 0.91 per cent from 0.71 per cent in April. Fuel and power inflation was (-)6.14 per cent in May.
The hardening of WPI food inflation follows the trend of retail inflation, released yesterday. RBI mainly takes into account retail inflation while formulating monetary policy.
Retail inflation touched a 21-month high of 5.76 per cent in May mainly due to rising prices of food items.