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Thursday, October 01, 2009

WPI based inflation at 0.83%

Set to grow further

India's headline inflation has entered in positive zone which has been adding stress on the apex bank of India in deciding priorities between price stability and growth. In first quarter policy review, RBI has raised concern for inflation and raised projection to 5%. The constant growth in food prices has main concern for inflation and likely to be continue at the back of lower rainfall.

The India's headline inflation stood at 0.83% during the week ended 19 September 2009 compared with 12.13% during the week ended 20 September 2008 and 0.37% during the week ended 12 September 2008.The official Wholesale Price Index for 'All Commodities' for the week ended 19 September 2009 rose by 0.3% 243.3 from 242.6 for the previous week. All the three indexes, primary article, manufactured and fuel power recorded growth during the week ended.

The index for primary articles rose by 0.4% to 276.5 from 275.3 for the previous week. The index for ‘Food Articles' group rose by 0.7% to 282.2 (Provisional) from 280.3 (Provisional) for the previous week due to higher prices of fish-inland (13%) and condiments & spices, masur and pork (1% each). However, the prices of urad (2%) and bajra and maize (1% each) declined.

The index for fuel and power rose by 0.7% to 345.8 from 343.5 for the previous week due to higher prices of furnace oil (12%) and light diesel oil (4%).

One of the major index in WPI that is manufactured product rose by 0.1% to 209.0 from 208.8 for the previous week. The index for 'Food Products' group declined by 0.2 % to 241.2 from 241.7 for the previous week due to lower prices of cotton seed oil and imported edible oil (3% each), oil cakes (2%) and groundnut oil (1%). However, the prices of butter (4%), sunflower oil, rice bran oil and ghee (2% each) and khandsari and coconut oil (1% each) moved up.

The index for 'Chemicals & Chemical Products' group rose by 0.2% to 229.6 from 229.1 for the previous week due to higher prices of vitamin liquids and synthetic rubber (7% each), acid (all kinds) (5%), polystyrene (4%) and resins (all kinds) and carbon black (1% each).

The index for 'Basic Metals Alloys & Metal Products' group declined marginally to 260.5 from 260.6 for the previous week due to lower prices of utensils (18%), lead ingots (3%) and zinc ingots (1%). However, the prices of brass sheets & strips (10%), foundry pig iron, basic pig iron and steel ingots (3% each) moved up.

The inflation is set to grow, the slowdown in pace of fall indicates the same. The surge in food prices crafts the concern for the daily consumption basket. The surge in prices of essential commodities is due to lack of supply.

To put ceiling on growing food prices India's cabinet has approved an extension of limits on stocks that can be held by traders of sugar, vegetable oil, lentils and rice until September 2010. Meanwhile the shortfall in area sown under kharif crop has been adding more stress on outlook on food prices. However the improvement in water reservoir level has been providing relief to farmers.

The apex bank of India expects 5% inflation for March 2010 however current macro economy indicators are indicating higher inflation level then expected earlier. Festive season and increased in disposable income will boost up the demand in near term and therefore inflation. The lower base will also play its role.

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