Economy

Who said inflation is down?

Rajalakshmi Nirmal BL Research Bureau | Updated on January 24, 2018 Published on June 21, 2015

Inflationtab

Though the overall price trend is declining, for many items of daily consumption, especially food, it has risen



Wholesale and consumer price indices are trending lower, but this has not brought relief to the common man. In May, the wholesale price index recorded negative growth for the seventh consecutive month. The consumer price index edged marginally higher in May to 5.01 per cent, from 4.87 per cent a month earlier, but was still well below last year’s 8.33 per cent rise.

While these numbers capture the overall trend, there is no respite in the inflationary trend in many items that a household consumes daily, especially food.

The food and beverages index in the CPI moved up 5.1 per cent in May over the previous year but many of its components, such as milk and milk products, condiments and spices, pulses and products, meat and fish, and prepared meals, grew at a higher rate.

Higher food bill

The sharpest spike has been in pulses. The price of Arhar (tur), for instance, is up 47 per cent this year, according to the Ministry of Consumer Affairs. Urad dal sells in the Mumbai retail market for ₹123/kg, up from ₹79 last year. Similarly, the prices of moong, masoor dal and gram are up.

Other protein supplements such as milk and egg have also turned costlier. The price of an egg in Mumbai has risen 28 per cent over the past year to ₹4.36, according to the National Egg Co-ordination Committee. Egg prices in other States have also gone up by a similar extent.

The prices of dairy products are hurting, as larger players such as Amul and Mother Diary hiked the prices of toned milk by 5-6 per cent to ₹36-38/litre in May last year.

Why the spike

Fear of lower output has pushed up dal prices. The Agriculture Ministry in its third advance estimate in May said pulses output in 2014-15 could be 17.38 million tonnes, two million tonnes below target and a sharp 12 per cent drop over last year.

The prices have also surged as there are no carryover stocks, says Madan Sabnavis, Chief Economist, CARE. “There has also been some speculative activity. Dealers are holding stocks in anticipation of a rally in prices as this year the crop is expected to be lower,” says Sabnavis.

Milk prices moved up last calendar, despite the declining trend in the global market and adequate domestic supplies. This was because dairies increased the price they pay to farmers so as to compensate them for the inflation in the price of cattle feed and transportation costs.

Egg prices have shot up because the supply is stagnating even as demand continues to grow, say industry sources. Poultry farmers have been loading the increased feed costs on to egg prices.

Services get pricier

Besides food, the rising cost of healthcare and education is also burning a hole in the pocket of the aam aadmi. In May, the CPI education and stationery index was up 7.4 per cent over last year. Many experts opine that the inflation in healthcare could be in double digits with the cost of diagnostics, medical equipment and doctor fee going up. The healthcare index in the CPI, however, shows a far milder growth.

The increasing cost of commuting in metros is another drain. In May, the CPI fuel and light index increased 6 per cent, up from 3.8 per cent in January.

Published on June 21, 2015
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