WPI inflation for July 2011 dips to 9.22 % from 9.44 % in June 2011

India’s Headline Inflation measured by Wholesale Price Index (WPI) rose to 9.22% in July, which is just below the June’s 9.44%. The plunge in inflation on monthly basis is due to moderation in food inflation, fuel and power inflation, however, the manicured products segment of WPI, surged to 7.49% in July from 7.43% in June. The government also revised upward the headline inflation data for the month of May to 9.56% from 9.06%. This was the second revision of inflation data in the current financial year. In its last revision the government had increased the inflation data for the April from 8.66% to 9.74%  

According to the data released by the ministry of commerce and industry, the Wholesale Price Index for 'All Commodities' (Base: 2004-05 = 100) for the month July, 2011 rose by 0.7% to 154.0 (Provisional) from 153.0 (Provisional) for the previous month. The annual rate of inflation, based on monthly WPI, stood at 9.22% (Provisional) for the month of July, 2011 (over July, 2010) as compared to 9.44% (Provisional) for the previous month and 9.98% during the corresponding month of the previous year. Build up inflation in the financial year so far was 3.01% compared to a buildup of 3.45% in the corresponding period of the previous year.

On monthly basis, the index for Primary Articles group rose by 0.2 percent to 197.9 (Provisional) from 197.5 (Provisional) for the previous month. The index for ‘Food Articles’ group rose by 1.4 percent to 192.8 (Provisional) from 190.1 (Provisional) for the previous month due to higher prices of coffee (15%), gram (8%), fish-inland (7%), ragi (6%), mutton (4%), fruits & vegetables (3%), barley, bajra and rice (2% each) and wheat (1%).  However, the prices of condiments & spices (3%), urad, egg and arhar (2% each) and poultry chicken, masur and tea (1%) declined.

The index for ‘Non-Food Articles’ group declined by 3.0% to 175.8 (Provisional) from 181.3 (Provisional) for the previous month due to lower prices of raw cotton (12%), flowers (7%),  raw rubber (6%), copra (4%), soyabean and mesta (3% each) and raw jute (2%). However, the prices of gaur seed (20%), niger seed (16%), linseed (11%), coir fibre (8%), sunflower (6%), gingelly seed (5%), safflower (4%), castor seed (3%) and rape & mustard seed, cotton seed, groundnut seed and raw silk (1% each) moved up.

The index for ‘Minerals’ group declined by 1.5% to 307.7 (Provisional) from 312.5 (Provisional) for the previous month due to lower prices of zinc concentrate (28%), limestone (7%), barytes (5%), steatite and iron ore (4% each) and sillimanite and crude petroleum (1% each).  However, the prices of bauxite (7%), magnesite (5%), chromite (4%) and copper ore (3%) moved up.

The index for the Fuel and Power rose by 2.5% to 165.6 (Provisional) from 161.6 (Provisional) for the previous month due to higher prices of kerosene (13%), LPG (11%) and high speed diesel (7%).  However, the prices of bitumen (6%), furnace oil (4%), naphtha and light diesel oil (3% each) and aviation turbine fuel (2%) declined.

The index for Manufactured Products rose marginally by 0.3% to 137.7 (Provisional) from 137.3 (Provisional) for the previous month. Under this major group, products such as ‘Food Products, ‘Beverages, Tobacco & Tobacco Products’, 'Wood & Wood Products', 'Transport, Equipment & Parts products,  'Rubber & Plastic Products’, and Paper & Paper Products' group, registered growth in prices for the month of June. However, products like 'Textiles' group and Machinery & Machine Tools’ showed decline in prices for June.

The surge in manufacturing inflation in July is alarming. It has been above 7.4% since May 2011. Which indicated that the Reserve Bank of India (RBI) is expected to maintain its anti inflationary monetary policy stance and it is most likely to go for 12th in row on 16 September. Since March 2010 RBI has increased it key policy rates 11 times. 

In the Independence Day speech Prime Minister Dr. Manmohan Singh had expressed his concern over the price scenario. Prime Minister said 'Our country is passing through a phase of sustained high inflation. Controlling rising prices is a primary responsibility of any government. By adding further Prime Minister said 'I wish to assure you today that we are continuously monitoring the situation to find out what new steps can be taken to arrest rising prices. Finding a solution to this problem will be our top-most priority in the coming months.'