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Wholesale inflation at 8-month high; here’s how Coronavirus impact may fix things in February

FE Online
CPI, retail prices, CPI inflation, cpi at 6 year high, wholesale prices, economic growth, RBI, reserve bank of india

After retail inflation rose to a six-year high, wholesale prices too surged in January, beating estimates. WPI-based wholesale inflation for the month of January 2020 was recorded at 3.1 per cent, an eight-month high, as against CNBC-TV18 poll of 2.90 per cent. The inflation hit 3.1 per cent last time in April 2019. It stood at  2.59 per cent for the previous month and 2.76 per cent during the corresponding month of last year. The retail inflation, released by the government earlier this week, rose to 7.59 per cent in January, much above the RBI’s comfort range, mainly owing to surging vegetable and food prices. In the final bi-monthly policy for FY20, the RBI kept the interest rates unchanged, while keeping an accommodative stance. The central bank had projected the inflation to rise further in the first half of 2020.

The food articles index fell by 1 percent to 160.8 (provisional) as against 162.5 (provisional) for the last month on account of the lower price of fruits and vegetables, tea, arhar, beef and buffalo meat, among others. The inflation in food articles slowed to 11.5 per cent as against 13.24 per cent in December. In onion, inflation came down to 293.3 per cent from 455.8 per cent. In potato, it was 87.8 per cent as against 45% in December.

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However, prices of maize, barley, egg, wheat, poultry chicken and condiments and spices, mutton and milk surged. The higher prices of crude also moved up the index for crude petroleum and natural gas.

"Higher customs duties would push up the inflation related to imports to some extent going forward. However, the impact of the spread of the coronavirus on risk sentiment and commodity prices, including crude oil, is expected to exert a substantial moderation on the wholesale inflation in February 2020", Aditi Nayar, Principal Economist, ICRA, said.