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Thursday, May 28, 2009

Inflation stands unchanged at 0.61%

India's Wholesale Price Index (WPI) based inflation rose 0.61% in the week ended 16 May 2009 from year earlier same as in the previous week, but substantially lower compared to 8.66% a year ago. However, the index rose 0.1% to 232.2 from previous weeks level, recording seventh weekly gains.

The index of primary articles rose 0.04% from previous weeks level, recording rise for the seventh consecutive week, while manufacturing index rose 0.1% posting tenth weekly rise. However, the index of fuel, power, light and lubricants also moved 0.1% during the week compared to its previous weeks level.

Within the primary articles, the index of food articles declined 0.04% from the previous weeks level due to lower prices of gram, fruits & vegetables and jowar (1% each), but non-food articles increased 0.2% powered by higher prices of raw cotton (2%) and linseed (1%). However, the primary article inflation climbed up to 6.22% from 6.05% in the previous week.

The index for manufacturing product group rose 0.1% from previous week, while the annual inflation in the manufactured product group stood at 1.1%. Among the manufactured products, the index for food product climbed up 0.5% due to higher prices of bagasse (25%), unrefined oil (21%), malted food (7%), imported edible oil (3%) etc, while the index of beverages tobacco & tobacco products rose 0.1% from the previous week level. However, the index of textile group and transport equipment & parts declined 0.1% each from their previous weeks levels.

The inflation has continued to be below 1% for the sequential eleventh week, but it has been rising for the seventh week on week-on-week basis, which is raising concerns. The weekly rise is largely contributed by primary articles, while lower industrial production has also pressured the prices of manufactured products.

A survey of professional forecasters conducted by the Reserve bank has projected the WPI based inflation to be negative at -1.4% in the first quarter of 2009-10 and further deeper negative at -2.5% in the second quarter, due to rapid rise in prices in the corresponding previous period. However, during the first seven weeks out of the 13 weeks in the first quarter, the inflation stood at 0.5% compared to 8.3% in the corresponding previous year period.

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