High food, fuel prices push inflation to 5.7 percent

New Delhi, April 15: India’s wholesale price based inflation rose to three months’ high of 5.7 percent in March from 4.68 percent in the previous month following sharper increase in food and fuel prices, government data showed Tuesday. (Read: Retail inflation rises to 8.31 percent in March)

The rise in inflation will force the Reserve Bank of India (RBI) to maintain a tight monetary policy, even though it is hurting growth.

The country’s main inflation figure based on the Wholesale Price Index (WPI) stood at 5.65 percent in March a year ago.

Build-up inflation rate in the financial year ended March 31, 2014, was 5.7 percent compared to a build-up rate of 5.65 percent in the corresponding period of the previous year, according to data released by the ministry of commerce and industry here.

WPI inflation data for January is revised upward at 5.17 percent from 5.05 percent announced earlier.

Food prices jumped by 9.9 percent in March as compared to 8.12 percent in the previous month. Fuel and power inflation surged to 11.22 percent.

An economist at Angel Broking, Bhupali Gursale said the March inflation data is disappointing and is much higher than the markets’ expectations of 5.3 percent.

“This rise can be largely attributed to higher inflation in perishable food items as well as components of fuel such as coal, LPG and diesel,” Gursale said.

There was a sharp increase in vegetables, fruits, milk, egg, meat and fish prices.

Potato became costlier by 27.83 percent during the month under review year-on-year. Fruits prices jumped by 16.15 percent. Milk became costlier by 9.47 percent and eggs, meat and fish prices surged by 11.19 percent.

Diesel became costlier by 14.63 percent in March year-on-year. Prices of liquefied petroleum gas (LPG) grew by 9.28 percent and petrol became costlier by 5.91 percent.

Core inflation also inched higher to 3.5 percent in March from 3.2 percent in the previous month.

“Tackling food inflation should be the top priority for the incoming government. Unless this critical economic variable is brought under control, we could see a lasting impact on the overall growth scenario,” said Sidharth Birla, president of industry body FICCI.

The Confederation of Indian Industry (CII) said the rise has risen due to supply side constraints in the agricultural side.

“The revival of inflation, especially of food prices, calls for supply side initiatives to raise agriculture productivity,” CII said.

Inflation in manufactured products that has 64.97 weight in the WPI, eased to 3.23 percent in March as compared to 4.28 percent recorded in the corresponding month of last year.

Primary articles inflation rose to 7.66 percent during the month under review from 7.36 percent recorded in the same month a year ago.