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India's April Inflation Rate Rises

indiainflation 051412

After cooling off last month, India's headline annual inflation rate for all commodities, based on the new series of WPI (Wholesale Price Index), for the month of April rose to 7.23 percent from the preceding month's 6.89 percent due to costlier prices of vegetables, potato, egg/meat/fish and pulses and some other manufactured products.

The rate of inflation was also lower than the 9.74 reported in the corresponding month last year, data say.

As per the official data released on Monday, inflation in food items stood at 10.49 percent in April, compared to 9.94 percent in March.

Vegetables turned expensive by 60.97 percent and potato by 53.44 percent, while egg/meat/fish and milk were up by 17.54 percent and 15.51 percent respectively. However, the rates of fruits and onion declined by 15.34 percent and 12.11 percent respectively.

Build-up inflation during the current fiscal so far fell to 2.07 percent from 4.57 in the corresponding period last year, the data showed.

Going by provisional figures, the WPI for 'all commodities' for March rose by 2.07 percent to 163.1 from its previous month's level of 159.8.

Final annual rate of inflation for February (based on the 2004-05 base year) revised upward to 7.36 percent from the earlier provisional figure of 6.95 percent.

Primary Articles

Index for the 'Primary Articles' group increased by 4.65 percent from the preceding month of April.

The groups and items for which the index showed variations during the month were:

Index for 'Food Articles' group increased by 4.88 percent from the previous month, due to higher prices of fruits and vegetables, barley, tea, masur, maize, bajra, ragi, wheat, fish-marine, gram, rice and milk. However, prices of coffee, egg, condiments and spices, chicken, urad, pork and jowar declined.

Index under the 'Non-Food Articles' category rose by 3.28 percent from March, on higher prices of gaurseed, soyabean, gingellyseed, raw silk, mustardseed, nigerseed, mesta, fodder, and raw rubber, while those of flowers, copra, castorseed and raw jute dropped.

Index under the 'Minerals' category grew by 5.57 percent because of the higher prices of gypsum, copper ore, crude petroleum, steatite, chromite, sillimanite and magnesite, whereas those of zinc concentrate, barytes, manganese ore and iron ore declined.

Fuel, Power

Index for fuel, power, light and lubricants rose by 1.78 percent from the previous month due to higher prices of non-coking coal, furnace oil, aviation turbine fuel, naphtha and light diesel oil and LPG. However, the prices of coking coal and bitumen fell.

Manufactured Products such as tea leaf, rice bran oil, gingelly oil, sooji, cigarette, dried tobacco, timber/wooden planks, paper rolls, corrugated sheet boxes, laminated paper, leathers, leather footwear, plastic products, paints, synthetic resin, washing soap, organic manure, ayurvedic medicines, grey cement, asbestos corrugated sheet, railway sleeper, CRC, angles, wire rods, pencil ingots, iron and steel wire, control equipment, ball/roller bearing, fibre optic cable, electric switches, tractors, motor cycle/scooter and auto parts and some other items pushed up the index for 'Manufactured Products' to 0.98 percent.

However, prices of processed prawn, copra oil, coffee powder, canned fish, cord fabric, paper rolls, corrugated sheet boxes, printing and writing paper, laminated paper, gum, basic organic chemicals, copper ingots, silver and iron castings, microwave oven, earth moving machinery, electrical pumps, valves and battery dry cells, and mini bus/truck declined.

The Reserve Bank of India (RBI) at its April meeting slashed the repo rate by 50 basis points to eight percent for the first time in three years. The apex bank is expected to cut the repo rate further at its next policy meeting in June, considering the drop in IIP in March. It already indicated that the interest rates would be trending downwards in the coming days.

To fight inflation, the RBI aggressively increased interest rates 13 times between March 2010 and October 2011, taking its benchmark repo rate to 8.50 percent. It managed to get inflation down somewhat, but choked economic activity while doing so.

The RBI has forecast an inflation rate of 6.5 percent by March 2013. But according to its latest Inflation Expectations Survey of Households, most Indians think the inflation rate may well be 12.5 percent by then.

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