Expensive food items push inflation to 6.01% in May

Written by Press Trust of India | New Delhi | Updated: Jun 16 2014, 23:22pm hrs
InflationWholesale prices-based inflation in May accelerated to a five-month high of 6.01 per cent.
Rising prices of food and beverages like coffee, tea, poultry, fish and vegetables pushed up inflation to 5-month high of 6.01 per cent in May.

The Wholesale Price Index (WPI)-based inflation was 5.20 per cent in April and 4.58 per cent a year ago in May.

According to the data released by the Commerce and Industry Ministry today, food items which became expensive during the month include coffee (23 per cent), poultry chicken (7 per cent), fish-inland (6 per cent) and tea and fruits and vegetables (4 per cent each).

The other items in the primary articles segment which became dearer are condiments and spices, fish-marine, urad and masur (3 per cent each), rice and moong (2 per cent each) and milk, barley, pork, mutton and arhar (1 per cent each).

However, the prices of maize came down by five per cent), wheat and ragi by 2 per cent each and egg, jowar and gram by one per cent each.

In the 'Non-Food Articles' category, guar seed became expensive by 13 per cent, soyabean (10 per cent), copra (coconut) (8 per cent), tobacco (7 per cent), raw jute (5 per cent), raw silk (3 per cent), mesta (2 per cent) and groundnut seed, raw cotton and cotton seed (1 per cent each).

However, the data showed, the price of gingelly seed and flowers declined by 8 per cent each, fodder by 3 per cent and linseed, castor seed and sunflower by 1 per cent.

The inflation figures for March was revised to 6 per cent from 5.70 per cent reported earlier. The previous high was 6.4 per cent in December.

In the manufactured goods category, food items which became expensive include tea leaf (unblended) (11 per cent), tea leaf (blended) (8 per cent), gur and bakery products (4 per cent each), gola (cattle feed) and processed prawn (3 per cent each), copra oil and ghee (2 per cent each) and mixed spices, khandsari and oil cakes (1 per cent each).

However, the price of tea dust (unblended) declined by 3 per cent, groundnut oil and gingelly oil (2 per cent each) and soyabean oil and sunflower oil (1 per cent each).

The data further revealed that dried tobacco became expensive by 8 per cent and cigarette by 2 per cent.

In the textiles group category, man made fabric, jute sacking cloth, jute sacking bag and cotton fabric became dearer by one per cent each, though prices of jute yarn declined by 4 per cent and tyre cord fabric and gunny and hessian cloth by one per cent each.

Similar price increase was noticed in other categories like wood and wood products, paper and paper products, leather and leather products, rubber and plastic products and chemicals and chemical products.

Items in metals, machinery and machine tools and transport equipment categories too became expensive during May pushing up the overall inflation rate.

Indranil Pan, Chief Economist, Kotak Mahindra Bank Limited: A divergence seen between the CPI announced last week and the WPI announced this week. A downward shift in the Headline and Core CPI is not supported by a higher trend in the Headline and core WPI. Todays WPI indicates that from the input side, there is not much comfort for the Indian business segment, with the metal and chemical prices moving on the higher side. With the INR on a weak trend again and with global oil prices going up, it is yet not clear what type of input side pressures the Indian business community would have to build into their business models. Given this scenario, there could be continued hesitancy to reduce prices, even as the demand side dynamics appear to have been contained in a large way. At this point, with the CPI and the WPI moving in divergent directions, the RBI would not factor either of the surprises into its reaction function. The monsoon (read as El-Nino), implications of this on cereals and oil-seed prices domestically as also in the Asian region could form a key determinant of inflation dynamics in the months ahead. Consequently, we hold on to our view that the RBI will, in all probability, stay on an extended pause, at-least till the end of the current CY.