Deflation ends

The recent pickup in retail inflation combined with the new data on wholesale prices suggests that price pressures are gradually building up


Photo: Bloomberg
Photo: Bloomberg

A month ago, this column had asked whether the long tryst with wholesale price deflation was coming to an end . The latest data for April shows that wholesale price inflation moved into positive territory after 17 months. Three reasons were dominant—higher food prices, the recovery in energy prices and higher domestic demand for some goods.

Consumer prices are still rising faster than wholesale prices. But this is a good time to close the debate on whether Reserve Bank of India should take wholesale price deflation into account when deciding interest rates. This newspaper has consistently argued that the central bank should continue to focus on consumer prices.

The recent pickup in consumer price inflation combined with the new data on wholesale prices suggests that price pressures are gradually building up. It is not just food prices. Core inflation too is sticky. India has done well to nearly halve its inflation over the past two years. The battle could get tougher from here.

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