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High food and fuel prices push up wholesale inflation in May

India’s wholesale price inflation rose to 6.01 per cent last month compared with May 2013, led by rising prices of food articles besides petrol and diesel. This is the highest inflation since December 2013 when the wholesale price index (WPI) rose 6.4 per cent.

The WPI-based inflation was 5.2 per cent in April and 4.58 per cent a year ago in May.

The acceleration in wholesale inflation comes in contrast with consumer inflation, now the key metric deciding India’s monetary policy, which declined last month. The provisional annual inflation rate based for consumer price index (CPI) for May is pegged at 8.28 per cent compared with 8.59 per cent (final) in April 2014.

Even as wholesale price inflation has moderated over the past few months, the stubborn consumer inflation had restricted the RBI from loosening the monetary policy by cutting rates, which is seen crucial for reviving investments and thereby the economy.

The WPI inflation had previously slid under 6 per cent and barring the month of March, when it rose to 6 per cent, has been in the 5-5.2 per cent range, seen within the comfort zone of the monetary authorities.

This rose last month led by a 9.5 per cent rise in price of food articles, which comprise 14 per cent of the overall WPI. Within food, price of rice, potato, fruits and egg, meat and fish rose in double digits.

It was piled up by a 10 per cent rise in fuel prices, especially diesel. Fuel & electricity comprise around 15 per cent of the index.

Manufactured products which represent around two thirds of the index weightage saw a modest price rise of 3.55 per cent. Within manufactured products, textiles, beverages & tobacco, wood & paper and rubber products saw higher than average price rise in May. 

(Edited by Joby Puthuparampil Johnson)

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