WPI inflation touches double digits in April

Wholesale inflation

NEW DELHI : India’s wholesale price inflation galloped to double digits in April as pricing pressure built up due to rising oil and commodity prices, reflecting strong cost-push pressures.

Data released by the commerce ministry on Monday showed wholesale price index (WPI) based inflation rose to 10.49% in April compared to 7.39% in the preceding month. While food inflation rose to 4.92%, inflation for fuel and manufacturing items increased to 20.94% and 9.01% respectively.

In sharp contrast, retail inflation eased to a three month low of 4.29% in April as favourable base effects kicked in giving a false sense of normalcy.

Analysts feel onset of the second wave of the pandemic is likely to cap demand impulses owing to a prolonged negative output gap, but potential supply disruptions amid rising stringency of the state-wide restrictions will warrant attention.

Escalating covid cases have overwhelmed India’s health system, forcing many states to announce localized lockdowns and night curfews which are expected to delay a strong recovery in domestic economic activity. Moody’s Investors Service on Tuesday slashed its FY22 economic growth forecast for India to 9.3% from 13.7% estimated earlier, citing negative impact of the second wave of coronavirus pandemic. S&P Global Ratings last week said it expects India’s GDP growth at 9.8% under its moderate scenario and to 8.2% under the severe scenario, based on when the current infection wave peaks.

The central bank is expected to keep the policy rate unchanged and will certainly maintain an accommodative stance to ensure ample liquidity and keep long-term interest rates from rising, the Asian Development Bank said earlier this month. “While inflation will stay within the target range, upward pressure on bond yields may come from the large fiscal deficit, the government’s aggressive borrowing programme in FY21, and higher global bond yields. Large capital inflow poses a challenge to the central bank as it strives simultaneously to maintain price and exchange rate stability and set interest rates that facilitate economic recovery,” it added.

News Source:- Livemint

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