The Hindu Business Line : Costlier food items push up inflation rate

Temporary spurt
Rates of primary food articles rose to 8.95 per cent mainly on account of vegetable prices.
Prices of manufactured products dipped to 4.76 per cent, from 5.19 per cent during the previous week.

Our Bureau

New Delhi, July 13 Rising food product prices pushed up the annual wholesale inflation rate in late June even as analysts termed the spurt in inflation as a temporary phenomenon and expect it to come down in the coming months on account of a high base.

The widely tracked annual wholesale price index-based inflation rose 4.27 per cent during the week ended June 30, higher than the previous week’s annual increase of 4.13 per cent, data released by the Ministry of Commerce and Industry showed on Friday. Inflation was measured at 5.21 per cent during the corresponding week a year ago.

The rise in inflation during the latest reported week, the second successive week where an increase in the headline inflation was seen, comes after 10 consecutive weeks of a declining trend.

Declining Trend

Inflation had fallen by 231 basis points in the span of these 10 weeks (between April 7 and June 16 this year). Despite a rise, the current inflation is much lower than the level projected by the RBI for the fiscal. The RBI has a target to contain inflation at close to 5 per cent during 2007-08 and bring it down to 4-4.5 per cent over the medium-term.

The rise in the inflation rate during the latest reported week was mainly on account of a spurt in the prices of primary articles for the second week in a row.

Negative Inflation

Inflation in primary food articles rose to 8.95 per cent during the latest reported week from 6.75 per cent and 7.14 per cent in the weeks ended June 16 and June 23 respectively. The increase was mainly on account of vegetable prices.

Inflation in the fuel group remained unchanged for the third consecutive week after dropping to an eight-year low of (-)1.35 per cent in the week ended June 16. The negative inflation in the fuel group is a result of the high base last year. The Centre had hiked the retail prices of petrol and diesel in June 2006, which was subsequently reduced in February and March 2007. Hence, the current prices of these products are ruling below their year-ago levels, thus pulling inflation in the fuel group in the negative zone.

Primary Articles

The higher base last year also led to a fall in inflation in manufactured products. Inflation in manufactured products dipped to 4.76 per cent during the latest reported week, from 5.19 per cent during the previous week.

“We believe that the current rise in inflation is temporary. We expect inflation to come down again in the coming months on account of the higher base in case of primary articles, which are the prime culprit for the rise in headline inflation currently, and the manufactured products, which have the largest share of 63.75 per cent in the WPI,” CMIE said.

Inflation for the week ended May 5 was revised to 5.74 per cent compared with the provisional figure of 5.44 per cent.

This was done as Wholesale Price Index for the week was revised to 212 points against the provisional figure of 211.4 points.