Rise in rates boosts expectations of a prolonged pause on policy rates by the Reserve Bank of India.
The central bank revised downward forecast for retail inflation to 4.7-5.1 per cent for April-September and 4.4 per cent for October-March. However, the overall food inflation shot up by 3.75 per cent, moderated largely by falling price of pulses.
According to the Ministry of Commerce and Industry, last month's rise in WPI inflation rate was slower on a year-on-year (YoY) basis.
The more widely-tracked Consumer price index-based inflation rate for April will be released later in the day.
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"The hike was largely driven by an upswing in core inflation, especially with a broad-based increase in services segment while marginal upside movements were seen in clothing and housing segments as well", Richa Gupta, Senior Director and Senior Economist, Deloitte India, said. Within the category, prices of high-speed diesel rose twice as fast at 13 per cent in April, petrol prices rose by 9.45 per cent in April, up from the 2.55 per cent rise seen in March. With this, WPI has surged to 3-month high in the latest month.
"The government may prefer to wait for additional information about the level at which the monthly GST revenues stabilise after the e-way bill introduction, before reducing excise duty on fuels", she said.
The same was true for wheat, which saw a smaller deflation of 0.07 per cent in April as compared to the 1.17 per cent fall in prices in March.
Going ahead, fuel and power segment which has a weight of 13.15% in WPI, rose by 0.9 percent to 98.9 (provisional) in April 2018, from 98.0 (provisional) for the previous month. While fruits and vegetables too are increasing at a quick pace, items such as onion and potato have risen from a low base, thus not causing much discomfort to the cosumers.