After eight weeks of consistent fall, India's inflation has started to crawl upwards thanks to the rise in food articles (part of primary articles), food products (part of manufactured products) too rose by 1% in the week ended 17th January 2009 over the previous week. Food articles have 15.40246% weightage while manufactured products have 63.75% weightage in India's WPI.
Besides rising food articles and manufactured products, the Fuel, Power, Light & Lubricants also registered a rise primarily due to 4% rise in aviation turbine fuel and 1% rise in furnace oil.
Primary articles group declined by 0.1% on 0.2% fall in non food articles, but the fall was arrested by 0.1% rise in food articles. Inflation of primary articles was 11.01% in the week ended 17th January 2009, and remains in double digits for 33 weeks in succession since 7th June 2008.
The annual rate of inflation for food articles stood at 11.17% for the week ended 17th January 2009 as compared to 11.64% in the previous week. It was 2.27% as on 19 January 2008. Manufactured products recorded 0.3% rise, primarily due to 1.0% surge in the index of food products and chemicals & chemical products. The index of beverages tobacco & tobacco products rose by 0.6%, Textiles too rose by 0.1%.The index of basic metals alloys & metal products group rose marginally..
Within manufactured products, the sub group that recorded a fall of 0.1% was non-metallic mineral products (0.1%). Machinery & machine products, and paper & paper products groups reported steeper 0.3% fall while transport equipment and parts declined by 0.2%.
Outlook
There is a slight acceleration in inflation number on week on week basis due to the growth in manufactured index, which is holding highest weight in WPI basket.
Reserve Bank of India is expecting further moderation in inflation rate. In recent policy review the apex bank of the country has revised inflation projection downward to 3% by end- March 2009 from 7% set earlier.
On the other hand, inflation based on various consumer price indices (CPI) is still in double digits due to the firm trend in prices of food articles and the higher weight of food articles in measures of consumer price inflation.
As a measure to reduce inflation the governnment, on 28 January 2009, has reduced petrol prices by Rs 5 a litre, diesel by Rs 2 and cooking gas by Rs 25 per cylinder. The new prices became effective from midnight. The lowering of prices is thus expected to help reduce inflation and increase the impact of the government's economic and fiscal stimulus packages.
As the decline in input prices percolates over time to the prices of manufactured and other products, consumer price inflation too is expected to soften in the months ahead.
source: Capital Market