Wholesale inflation in food prices climbed for the second month in a row – it soared to 7.88% in May with a 0.79% increase, compared to 4.23% in April with a 0.34% rise in prices. This comes on the heels of the retail inflation, which is measured by the Consumer Price Index that jumped to 5.76% in May, the highest it has been in 21 months.
According to data on Wholesale Price Index released by the industry department, the rise in wholesale food inflation was a results of a spike in vegetable prices to 12.94% in May, while prices of pulses increased to 35.56% and that of potato to 60.01%, Livemint reported. Food inflation rose to 7.55% this month from 6.4% in April, according to data from the Central Statistics Office.
The rise in retail inflation makes it unlikely that the Reserve Bank of India will lower interest rates in its next policy review in August. In its June monetary policy review, the apex bank had raised concerns over rising inflation, though it left policy rates unchanged. The RBI and the Centre aim to curb retail inflation to 5% by March 2017.
In addition to the hikes in the prices of petrol and diesel, taxpayers are expected to feel the inflationary pressure of the Krishi Kalyan cess of 0.5%, which applies to all taxable services June 1 onwards. However, the south-west monsoon, which hit Kerala on June 8 and is vital to the kharif crop season, is expected to lead to a gradual drop in food inflation.