WPI rises to 8.56 per cent in January.
The headline inflation rate, as measured by the Wholesale Price Index (WPI), surged to a 14-month high of 8.56 per cent in January, beating the Reserve Bank of India’s projection of 8.5 per cent by the end of March.
The increase in the overall inflation rate was primarily driven by rising fuel prices, though the consistently rising food prices showed some moderation during the month.
Headline inflation stood at 7.31 per cent for the previous month of December 2009 and at 4.95 per cent during the corresponding month in 2009.
“The inflation has shot up quite substantially. The increase is across the board, as core inflation has picked up even as food inflation has stabilised marginally. At this rate, inflation on a point-on-point basis might be in double digits (around 10 per cent) by the end of the current financial year, ending March,” said Jyotinder Kaur, economist, HDFC.
Analysts expressed concern over that fact that headline inflation, which had primarily been driven by food prices, is now registering inflationary pressures from all the three categories, including manufactured products and the fuel index.
“We expect core inflationary pressures to rise further, because input costs have surged faster than output prices as non-food prices continue to rise. We expect inflation to be in double digits by March,” said Sonal Varma, economist, Nomura Financial Advisory and Securities, India.
Coupled with an industrial growth rate of 16.8 per cent in December, which was more than anticipated, analysts say the indications of an increase in rates were very strong.
“The economy is now showing clear signs of demand revival as reflected in both macro and micro levels. We maintain our view of a minimum 125-basis-point rise in policy rates most likely in the April policy review,” said Rohini Malkani, economist, Citi India.
Inflation rate for primary articles, which has been consistently on the rise, came down marginally by 36 basis points on an annual basis to 14.52 per cent in January from 14.9 per cent in December. Inflation rates for cereals and pulses, which constitute the essential consumption basket, continued to be in double digits at 13.7 per cent and 45.63 per cent.
Fuel prices rose by 2.6 percentage points to 6.9 per cent during the month as against 4.3 per cent in the previous month of December.
Prices of manufactured products also rose by 1.4 percentage points on an annual basis to 6.6 per cent in January as against 5.17 per cent in December 2009. Sugar prices , registered a marginal decline of 5 basis points in January as compared to the previous month of December, however , the inflation rate continued to be as high as 51.3 per cent for the month under consideration.
