WPI inflation jumps to 9.06% in May

Headline inflation in the country went up to 9.06 per cent in May on the back of rising manufactured products and petrol prices, which is expected to prompt the Reserve Bank to go for another rate hike at its mid-quarterly policy review meeting later this week.

Inflation, as measured by the Wholesale Price Index (WPI), stood at 8.66 per cent in April. It had stood at 10.48 per cent in May 2010.

Meanwhile, as per data released by the Government today, overall inflation in March this year has been revised upward to 9.68 per cent from the provisional 9.04 per cent.

As per the latest data, prices of manufactured products, which have a weight of around 65 per cent in the WPI basket, went up by 7.27 per cent year-on-year in May.

Manufacturing inflation has been steadily rising since February this year, when it crossed the 6 per cent mark. It was 6.18 per cent in April.

As per the data released today, inflation in the fuel and power segment, which has a weight of almost 15 per cent in the WPI basket, stood at 12.32 per cent year-on-year. This showed a slight moderation from the 13.32 per cent rate reported in April.

However, the rate hike of over Rs 5 in petrol prices by state-owned old marketing companies in mid-May had a visible impact, with the prices going up by 27.31 per cent on an annual basis.

During the month under review, primary articles went up by 11.3 per cent on an annual basis against 12.05 per cent in the previous month. Primary articles have a share of around 20 per cent in the overall WPI basket.

Within the primary articles segment, food articles became 8.37 per cent more expensive, while the prices of non-food primary articles went up by 22.35 per cent. Both were down from the previous month.

The RBI has already hiked key policy rates nine times since March 2010 to curb demand and tame inflation. With the headline inflation remaining high, as shown by the latest numbers, it is now almost certain that the apex bank will go for another hike at its June 16 mid-quarterly review.

Experts have said that such action is inevitable and the RBI had also said in recent times that taming inflation is the biggest challenge before it.

However, the latest inflation numbers are in line with RBI’s projection for the first half of the fiscal.

In its monetary policy for 2011-12 released last month, the central bank had said that continued high prices of global commodities, particularly that of oil, will continue to drive the rate of price rise.

It projected inflation to average 9 per cent for the first six months of 2011-12 before moderating to around 6 per cent by the year-end.

Both the RBI and other experts had also said that inflationary pressure during the next few months would be more from commodity prices, rather than on account of food items, as was the case in 2010.

However, food inflation also inched up to above 9 per cent in the last week of May after a two-month-long period of moderation. Headline inflation has been above 8 per cent since January 2010.

The latest numbers come as a setback to the government after a slew of bad news, including five-quarter low GDP growth of 7.8 per cent in January-March and a slowdown in factory output growth to 6.3 per cent in April.

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