Headline inflation for month of May stood at 9.06%

From last six to seven months WPI inflation in the economy has been around 9% on an average. The WPI inflation numbers for month of May 2011 is disappointing for every segment in the economy. This higher-than-expected increase in inflation without diesel, kerosene and cooking gas prices hike. Oil ministry is trying hard to reduce public sector oil marketing companies’ revenue losses and a price hike in remaining petroleum products is likely to take place. The present economic scenarios in the economy are making obvious for RBI’s 25 basis point hike in its key policy rates.

According to data released by the government today, WPI inflation in March this year has been revised upward to 9.68 % from the provisional 9.04 %. This upward revision is more than the market expectations.

The high headline inflation been above 9 % on an average from last six months, the manufacturing inflation going above 7% is serious concern for the nation’s sustainable development, this increase shows that the inflationary pressures are high despite the central banks aggressive monetary standing. With this elevated inflation, RBI is likely to go for 25 basis point hike.

According to the data released by the ministry of commerce and industry, the WPI inflation in the country stood at 9.06% in May 2011 against 8.66% on the previous month. This increase in inflation was on account of manufacturing inflation which have increased more than 2% from November 2010.  On Y-O-Y bases, there is moderation is primary articles, food articles and fuel and power by 11.3%, 8.37% and 12.32% respectively. But the manufacturing sector show record increase of 7.27%, which is going to pinch hard to the industry and economy at large.

Looking at the different segments of WPI inflation, it is clearly visible that the May inflation is driven by higher manufacturing goods price which increased 7.27% (Y-O-Y) as against to 6.18% for last month. The manufacturing sector accounts for around 65% of wholesale price index. The index for manufacturing sector rose by 1% to 137.2 from 135.8 for the last month.

Within the primary articles stood at 11.3% (Y-O-Y) as against 12.05% of last month. On Month-on-Month the index for this segment rose by 0.3% to 192.1 (provisional) from 191.6 (Provisional) for the last month. The index for food articles rose by 1.6% to 186.5 (provisional) from 183.5 (provisional) for the previous month. On Y-o-Y food articles stood to 8.37% as against 8.71% of last month. The index for ‘Non-Food Articles’ declined by 4.4% to 184.5 (provisional) from 192.9 (provisional). 

Finally the index for the fuel and power which has weight of almost 15% in the WPI stood at 12.32 % (Y-O-Y). the index of fuel and power rose by 0.3% to 160.4% (provisional) from 159.9 (provisional) for the previous month due to mainly higher prices of lubricants (5%), petrol, light diesel oil and bitumen (4% each), furnace oil and lignite (2% each) and aviation turbine fuel (1%).  However, the prices of coke (6%) declined. The petrol which account for almost 1% of the WPI saw almost 27% (Y-O-Y) increase in May. The huge jump in price is mainly because of increase in price of petrol by Public sector Oil marketing companies, in May OMCs had increase petrol prices by 8.6%.