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Thursday, August 06, 2009

Inflation at -1.58%

Monsoon is key concern

India's annual inflation rate has been consistently moving in negative zone. However the sustained rise in consumer price index ( CPI) has been adding stress on price stability.

The CPI for industrial worker recorded 9.29% growth in June 2009 compared with 7.69% increased recorded in the same month last year. CPI for agriculture laborers recorded 11.52% increased in June 2009 compared with 8.77% growth in June 2008. In short, CPI and WPI has showed varied framework of price stability, with WPI moving southward and CPI recording northward movement.

The official Wholesale Price Index for 'All Commodities' for the week ended 25 July 2009 rose by 0.04% to 236.9 from 236.8 for the previous week.

The annual rate of inflation, calculated on point-to-point basis, stood at -1.58 % for the week ended 25 July 2009.

The index for primary articles group rose by 0.4% to 262.2 from 261.1 for the previous week, mainly due to rise in index for 'Food Articles' at 0.8% to 261.0 from 259.0 for the previous week on accout of higher prices of fish-marine (8%), arhar (4%), urad (2%) and fruits & vegetables, moong, mutton, wheat, masur and condiments & spices (1% each). However, the prices of eggs (2%) declined.

The index for 'Non-Food Articles' group declined by 0.4% to 241.5 from 242.5 for the previous week due to lower prices of raw wool (11%), soyabean (5%) and niger seed (1%). However, the prices of raw silk (4%) and raw rubber (1%) moved up

The index for fuel and power group remained unchanged at its previous week's level of 338.2

The index for manufactured product declined by 0.1% to 205.6 from 205.7 for the previous week. The index for food products group declined by 0.3 % to 231.3 from 232.1 for the previous week due to lower prices of oil cakes (3 %) and imported edible oil (1%). However, the prices of cotton seed oil, groundnut oil and sugar (1% each) moved up. The index for textiles group rose by 0.1 % to 143.6 from 143.4 for the previous week due to higher prices of cotton yarn-cones (4%) and cotton yarn-hanks (1%). However, the prices of synthetic yarn and hessian cloth (4% each) and texturised yarn and polyester staple fibre (3% each) declined.

The index for paper and paper products group declined by 0.2 % to 204.2 from 204.7 for the previous week due to lower prices of newsprint and printing paper white (1% each).

The index for basic Metals alloys and Metal products group rose marginally to 255.2 from 255.1 for the previous week due to higher prices of zinc ingots (3%) and steel ingots, zinc and lead ingots (2% each).

On week on week basis , inflation rate has been registering growth and inching upwards. The RBI has already projected 5% inflation rate for the year 2009-10. Lower forecast and so far the poor performance of monsoon has been a major hindrance for the agricultural growth. The poor monsoons can have double whammy hit on Indian economic growth in terms of poor farm income as well as rural consumption demand. Prices of essential commodities has already been rising rapidly and expected to continue in near term. In short, monsoon is going to play crucial role in the price cycle of essential commodities.

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