Inflation continue to be in negative zone for the second week of June 09

Higher CPI quash benefits of WPI

The official Wholesale Price Index for all commodities for the week ended 13 June 2009 rose by 0.6% to 234.2 from 232.7 for the previous week. The annual rate of inflation, calculated on point-to-point basis, stood at -1.14% for the week ended 13 June 2009 as compared to -1.61% for the previous week and 11.80% during the corresponding week of the previous year.

All the major components of WPI recorded an increase from their previous week level. The index of primary articles rose by 0.1% to 256.3 from 256.0 for the previous week. Index of food and non-food articles move up from their pervious week levels. The index for food articles group rose by 0.2% to 251.2 from 250.8 for the previous week due to higher prices of tea and jowar (2% each) and arhar (1%). However, the prices of bajra (4%) and eggs (2%) declined. While index for non-food articles group also rose marginally to 236.0 from 235.9 for the previous week due to higher prices of raw jute (2%) and raw silk and rape & mustard seed (1% each).

The index for fuel, power, light and lubricant rose by 0.4% to 327.5 from 326.2 for the previous week due to higher prices of aviation turbine fuel (12%), light diesel oil (10%), furnace oil (3%) and naphtha (1%).

The major driver of WPI index, manufactured product rose by 1.0% to 205.8 from 203.8 for the previous week. The index for textiles, rubber and plastic products, chemicals and chemical products, transport equipment and parts rose from their previous week level. The index for textiles group rose by 0.7 % to 142.7 from 141.7 for the previous week due to higher prices of other cotton yarn and cotton yarn-'hanks (2% each) and cotton yarn-cones and synthetic yarn (1% each). The index for chemicals and chemical products group rose by 4.8 % to 228.2 from 217.7 for the previous week due to higher prices of capsules other than vitamin & antibiotics (58%) and liquid chlorine (1%).

However among manufactured product the index for food products, beverages tobacco and tobacco products, non-metallic mineral products, basic metals alloys and metal products, machinery and machine tools declined from their previous week levels.

Looking at the rise in all major indices of WPI, the plunge in WPI, only have a statistical significance. The higher base has led to a fall in WPI. However in real terms the situation is quite different. The soaring food prices, have put pressure on the daily consumption basket, reflected in the rising CPI. In addition to this the rise in CPI for May month is the highest in more in 13 years. It is the first time in more than a decade that consumer inflation in May has crossed the 10%-mark for the month. Point to point rate of inflation based on the CPI-AL and CPI-RL increased from 9.09% in April 2009 to 10.21% during May 2009.