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Thursday, July 16, 2009

Inflation in red for fifth consecutive week

Food articles remain under strain

The official Wholesale Price Index for all commodities for the week ended 4 July 2009 rose by 0.7 % to 236.4 from 234.7 for the previous week. The annual rate of inflation, calculated on point-to-point basis, recorded a negative growth for fifth consecutive week and stood at -1.21 % for the week ended 4 July 2009 as compared to -1.55 % for the previous week and 12.19 % during the corresponding week of the previous year.

The primary article index remained unchanged at its previous week's level of 258.5. Among the components the index for food articles group declined by 0.2% to 253.6 from 254.0 for the previous week due to lower prices of fish-marine (9%) and ragi and fruits and vegetables (1% each). However the index for non-food articles group rose by 0.3% to 237.7 from 237.0 for the previous week due to higher prices of gingelly seed (18%) and cotton seed (6%).

The index of fuel, power light and lubricant, which carries 14% weight, rose by 3.1 % to 338.2 from 327.9 for the previous week due to higher prices of naphtha (15%), furnace oil (11%), petrol (10%), high-speed diesel oil (7%), light diesel oil (4%) and bitumen (2%).

The index for manufactured product rose by 0.2% to 206.1 from 205.7 for the previous week. The index for food products, beverages tobacco and tobacco products, paper and paper products, rubber and plastic products, chemicals and chemical products, basic metals alloys and metal products recorded an increased from their previous week level. The index for chemicals and chemical products group rose by 0.1 %to 227.1 from 226.9 for the previous week due to higher prices of benzene (14%), p.v.c. resins (4%) and liquid chlorine and hair oil (1% each). In case of food products group rose by 0.5% to 234.0 from 232.8 for the previous week due to higher prices of coffee powder (7%), oil cakes (3%) and ghee and sugar (1% each).

On a flip side the index for textiles group declined by 0.1% to 143.6 from 143.7 for the previous week due to lower prices of hessian cloth (2%). The index for machinery and machine tools group also declined by 0.1 % to 171.8 from 171.9 for the previous week due to lower prices of jelly filled telephone cables (1%).

The IMD forecast of near normal monsoon dated 10 July 2009, has raised the concern about the agriculture production and thus the fear of rising prices of food grains. However changing monsoon condition has craft a favorable atmosphere for sowing season, which will expect to ease the pressure on supply side.

The Kharif sowing has progressed well in the last week ended 11 July 2009 and has shown significant rise in most of the crops. As on 10 July 2009, rice has been sown in 74.28-lakh hectare as compared to 38.14-lakh hectare last week, representing 95% rise in the sowing area. Coarse cereals have been sown in 66.56 lakh hectare, cotton in 48.07 LHA, sugarcane 42.21 LHA, oilseeds 56.07 LHA and pulses 12.48 LHA.

On a flip side the depreciation of rupee has adversely affected the import of pulses. The increase in import cost of various pulses due to the appreciation of US dollar adding stress on domestic prices. The rise in the food article prices put ceiling on consumer price index to come down. Going further the rise in minimum support prices, relaxation of income tax slab and budgetary focus on agricultural development will lead to enhance the purchasing power of the individuals, which will put upward pressure on inflation in long term.

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