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Food prices drive WPI inflation to 3-month high

K.R. Srivats
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Given the higher sequential WPI inflation in June and the sharp slide in the rupee, the RBI is unlikely to cut the policy rate on July 30.
Given the higher sequential WPI inflation in June and the sharp slide in the rupee, the RBI is unlikely to cut the policy rate on July 30.

The wholesale price index (WPI)-based inflation rose to a three-month high to 4.86 per cent in June, diminishing scope for a policy rate cut by the RBI on July 30.

The headline inflation print for June 2013 was higher than the 4.70 per cent recorded in May.

Core inflation eased to a 42-month low of 2.15 per cent as compared to 2.35 per cent in May.

The WPI inflation in June reversed the declining trend observed since February 2013 rising to 4.86 per cent on account of spurt in food prices and pass through in fuel prices due to impact of rupee depreciation.

Food inflation rose to 9.74 per cent in June from 8.25 per cent in the previous month.

Food inflation was mainly fuelled by spurt in prices of vegetables (16.47 per cent), onions (114 per cent), rice (19.11 per cent ) and cereals (17.18 per cent).

Reacting to the WPI number for June, Prime Minister’s Economic Advisory Council (PMEAC) Chairman C. Rangarajan said although inflation has risen a little bit, WPI seems to be stabilising.

But going forward, there will be impact of rupee depreciation, Rangarajan said, adding that RBI will have to face a difficult choice in the policy review on July 30.

Elevated Consumer Price Index (CPI) inflation for June in conjunction with rupee weakness may prompt RBI to stay put in July policy review despite depressed growth outlook, said a YES Bank knowledge report.

CPI inflation for June came in at 9.87 per cent, higher than 9.31 per cent in the previous month.

“As such we expect RBI to maintain status quo in the July policy review,” the report added.

The surprise element in today’s WPI inflation was that most of the import sensitive items within the WPI basket eased sequentially despite sharp depreciation of rupee.

This possibly reflected the lagged adjustment to prices, accompanied by weakening pricing power, said the YES Bank report.

srivats.kr@thehindu.co.in

(This article was published on July 15, 2013)
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Union Budget 2014-15 Highlights

  • Following are the highlights of the Union Budget 2014-15 presented by Finance Minister Arun Jaitley in Parliament on July 10, 2014
  • Income-tax exemption limit raised by Rs 50,000 to Rs 2.5 lakh and for senior citizens to Rs 3 lakh
  • Exemption limit for investment in financial instruments under 80C raised to Rs 1.5 lakh from Rs 1 lakh.
  • Investment limit in PPF raised to Rs 1.5 lakh from Rs 1 lakh
  • Deduction limit on interest on loan for self-occupied house raised to Rs 2 lakh from Rs 1.5 lakh.
  • Committee to look into all fresh tax demands for indirect transfer of assets in wake of retrospective tax amendments of 2012
  • Fiscal deficit target retained at 4.1% of GDP for current fiscal and 3.6% in FY 16
  • Rs 150 crore allocated for increasing safety of women in large cities
  • LCD, LED TV become cheaper
  • Cigarettes, pan masala, tobacco, aerated drinks become costlier
  • 5 IIMs to be opened in HP, Punjab, Bihar, Odisha and Rajasthan
  • 5 more IITs in Jammu, Chhattisgarh, Goa, Andhra Pradesh and Kerala.
  • 4 more AIIMS like institutions to come up in AP, West Bengal, Vidarbha in Maharashtra and Poorvanchal in UP
  • Govt proposes to launch Digital India’ programme to ensure broad band connectivity at village level
  • National Rural Internet and Technology Mission for services in villages and schools, training in IT skills proposed
  • Rs 100 cr scheme to support about 600 new and existing Community Radio Stations
  • Rs 100 cr for metro projects in Lucknow and Ahmedabad
  • Govt expects Rs 9.77 lakh crore revenue crore from taxes
  • Govt’s plan expenditure pegged at Rs 5.75 lakh crore and non-Plan at Rs 12.19 lakh crore.
  • Rs 2,037 crore set aside for Integrated Ganga Conservation Mission called ‘Namami Gange’
  • Kisan Vikas Patra to be reintroduced, National Savings Certificate with insurance cover to be launched
  • FDI limit to be hiked to 49% pc in defence, insurance
  • Disinvestment target fixed at Rs 58,425 crore
  • Gross borrowings pegged at Rs 6 lakh crore
  • Contours of GST to be finalised this fiscal; Govt to look into DTC proposal.
  • ‘Pandit Madan Mohan Malviya New Teachers Training Programme’ launched with initial sum of Rs 500 crore
  • Govt provides Rs 500 crore for rehabilitation of displaced Kashmiri migrants
  • Set aside Rs 11,200 crore for PSU banks capitalisation
  • Govt in favour of consolidation of PSU banks
  • Govt considering giving greater autonomy to PSU banks while making them accountable
  • Rs 7,060 crore for setting up 100 Smart Cities
  • A project on the river Ganga called ‘Jal Marg Vikas’ for inland waterways between Allahabad and Haldia; Rs 4,200 crore set aside for the purpose.
  • Govt proposes Ultra Modern Super Critical Coal Based Thermal Power Technology
  • Expenditure management commission to be setup; will look into food and fertilizer subsides
  • Impasse in coal sector will be resolved; coal will be provided to power plants already commissioned or to be commissioned by March 2015
  • Long term capial gains tax for mutual funds doubled to 20%; lock-in period increased to 3 years
  • Rs 4,000 cr set aside to increase flow of cheaper credit for affordable housing to the urban poor/EWS/LIG segment.
  • EPFO to launch the ‘Uniform Account Number’ service to facilitate portability of Provident Fund accounts
  • Mandatory wage ceiling of subscription to EPS (Employee Pension Scheme) raised from Rs 6,500 to Rs 15,000
  • Minimum pension increased to Rs 1,000 per month
  • Union Budget 2014: List of products getting cheaper/ costlier

  • Finance Minister Arun Jaitley today spared the common man from price hikes by keeping duties on commonly used day-to-day items unchanged but made it costlier for smokers and tobacco consumers with a steep increase in excise rate in tax proposals in Budget 2014—15.
  • Following is a list of what will be cheaper and costlier:
  • YOU WILL PAY LESS FOR
  • CRT television
  • LED/LCD TVs especially below 19 inch
  • Footwear priced between Rs 500 to Rs 1,000 per pair
  • Soaps
  • E—book readers
  • Desktop, laptops and tablets
  • RO based water purifiers
  • LED Lights, fixtures and lamps
  • Pre forms of precious and semi—precious stones
  • Sports Gloves
  • Branded petrol
  • Matchbox
  • Life micro insurance policies
  • HIV/AIDS drugs and diagnostic kits
  • DDT insecticides
  • YOU WILL PAY MORE FOR
  • Cigarettes
  • Aerated drinks with sugar
  • Pan masala
  • Gutka and chewing tobacco
  • Jarda scented tobacco
  • Radio Taxi
  • Imported electronic products
  • Portable X—ray machines
  • Half cut/broken diamonds.

  • DATA BANK

    Exchange Rate

    Dollar Spot Forward Rate

    Open-Ended Mutual Funds

    MCX-SX Currency Futures

    NSE Currency Futures


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