Inflation up 3.39 per cent, may rise further in January and February

Source: The Economic Times, Jan 16, 2017

NEW DELHI: As wholesale prices rose 3.39 per cent in December, India Inc today said the focus should be on growth-oriented reforms that boost consumption, investment and job creation, while economists opined that inflation may rise in January and February.

“At this juncture, it remains critical to further growth considerations. The latest index of industrial production numbers have reported an improvement; but this has come on the back of a favourable base.

“For a sustained turnaround, we will need to keep the focus on reforms. The forthcoming Union Budget is being looked forward to with great anticipation and should focus on driving consumption, investment and job creation,” Ficci President Pankaj Patel said.

Wholesale inflation rose to 3.39 per cent in December 2016, mainly due to rise in prices of manufactured items, even as food articles turned cheaper.

“Steady and continuous rise in prices of crude oil and strengthening of USD for the last one month may have negative impact on input prices for the industry, which has already started the pressure on its profitability owing to low demand,” Assocham Secretary General D S Rawat said.

Food inflation is likely to rise over the course of the ongoing quarter, as the base effect turns unfavourable, and the end of winter pushes up prices of perishables.”The trajectory of WPI inflation is likely to chart a rise in January and February 2017, before recording a dip in March 2017. In ICRA’s view, the wedge between the two inflation metrics would re-emerge in January 2017, with WPI inflation expected to exceed CPI inflation for the next few readings,” Aditi Nayar, Principal Economist at ICRA said.

The wholesale price index-based inflation, reflecting the annual rate of price rise, in November stood at 3.15 per cent. In December 2015, the print was (-)1.06 per cent.

WPI inflation in vegetables, at (-)33.11 per cent in December, saw deflationary pressure for the fourth consecutive month. This was helped by a substantial price fall in onions, which stood at (-)37.20 per cent.

Overall, the food inflation basket witnessed contraction, with inflation at (-)0.70 per cent in December as against 1.54 per cent in November.

Inflation in fuel and power and manufactured items saw some uptick, which pushed up the overall WPI inflation in December.

The monetary policy committee headed by RBI Governor Urjit Patel had last month held interest rates steady and said demonetisation of high-value currency notes could lower prices of perishables and reduce CPI inflation by 10-15 basis points by December.

RBI has projected March 2017 CPI inflation to be around 5 per cent.

 

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