The Hindu Business Line : Inflation resurrected

Since crossing the 7 per cent mark for the week ended March 22, the country has had no breather from soaring inflation. The latest numbers for the week ended April 26, put inflation based on the Wholesale Price Index (WPI) at 7.61 per cent, a record 42-month high.

What has been the key contributor to this bout of high inflation? Is it food prices alone? Or is it a combination of several constituents of the WPI? A year on year (y-o-y) comparison of the disaggregated inflation data for six weeks beginning March 22, reveals a few trends.

All the three groups of the index — primary articles, fuel and manufactured products shoulder equal blame for the rising prices.

While the primary articles group shows an increase of around 9 per cent, the other two have risen by about 7 per cent over the same period last year.

While prices of food articles (with the biggest share in the primary articles group) rose an average of 5 per cent during this period, non-food articles and minerals clocked a double-digit rise.

Prices of oil-seeds, a component of the former, increased by 17.7 per cent during the week ended April 26. Similarly, the soaring minerals component of the primary articles group was driven by iron ore prices, which were up 47 per cent for the latest week.

Aviation fuel prices skyrocket

The increase in petroleum product prices in a series of steps from February onwards appears to have made a big contribution to the inflation of 7 per cent.

Petrol prices, for instance, climbed by 4.5 per cent in the week ended February 16, naphtha jumped by about 6.5 per cent in mid-March and aviation fuel prices rose by about 14.5 per cent in mid-April, all adding up a 7 per cent plus inflation number, in the past few weeks.

Compared to the same period last year, aviation fuel prices are up by a whopping 50 per cent, naphtha by about 34 per cent and bitumen by about 40 per cent.

In the manufactured goods segment, prices of edible oil rose 21 per cent for the week ended March 22. But a reduction in the import duty of crude and refined edible oils appears to have quelled the runaway rise, with the inflation tapering to 13 per cent in the last week of April.

The increase in prices of iron and steel (under the metals group) still hovers at 35 per cent over last year.

The figures for the next few weeks may hold the key to figuring out if the slew of fiscal and monetary measures adopted by the government to rein in inflation has had the desired effect.

PARVATHA VARDHINI C

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