Inflation drops marginally to 8.66% in April

But oil price hike to push it up again

Inflation drops marginally to 8.66% in April

Despite this marginal decline the headline inflation is likely to shoot up if there is any hike in diesel price, which appears imminent in the face of rising global crude oil prices.

As far as statistics is concerned the marginal decline in the headline inflation is due to moderation in prices of certain food items. Besides, the marginal drop in inflation has taken place even as prices of manufactured products and fuel and power have shown upward trend.

The impact of recent petrol price hike on inflation will be known only when the inflation data for May will be out. Analysts say the marginal drop in inflation level as noticed in April will be short lived if the government makes an upward revision in retail prices of three other mass consumed products like—diesel, domestic cooking gas (LPG) and kerosene—in the face of rise in global crude oil prices.

Comparatively the overall inflation in April appears to be low when compared with the revised figure in March. The overall inflation, as measured on the basis of the Wholesale Price Index (WPI), now stands revised to 9.04 per cent for March from the original projection of 8.98 per cent.

As the government explains the revision was carried out as metal products were not incorporated earlier due to a programming error. Despite marginal decline the overall inflation at less than 9 per cent continues to stand at high level compared to tolerable limit of 5 to 6 per cent prescribed by the Reserve Bank.

In fact, the RBI in its monetary policy for 2011-12 has projected that inflationary pressure would continue to sustain for some more months before moderating to around 6 per cent by March, 2012. The Finance Minister Pranab Mukherjee while remaining cautious on movement of inflation in coming months said “the April prices had come down both on manufacturing sector and the food sector. This is a good trend and if it continues then perhaps it will be more moderate.”

Analysis of data shows the prices of primary articles -- food, non-food articles and minerals – went up by 12.05 per cent on an annual basis. While food items shot up by 8.71 per cent, non-food primary articles rose by over 27 per cent.

As far as price movement of key vegetables is concerned onion was cheaper by 6.37 per cent on an annual basis while potatoes became less expensive by 0.54 per cent. During April fuel and power prices went up by 13.32 per cent. Keeping the pressure on overall inflation the manufactured goods group index rose by 6.18 per cent on an annual basis. Manufactured items have the highest weight of 64.9 per cent in the WPI.

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