Oil, truck strikes fuel inflation rise

The annual (year-on-year) rate of inflation in Indian economy increased to 5.6 per cent for the week ending January 10, 2009 compared to 5.2 per cent reported last week, showing a rise of 36 basis points, largely attributable to the impact of the oil and transport sector strikes.

A Finance Ministry communique points out that the increase in the inflation rate has temporarily reversed the 11-week declining trend which had set in since the last week of October 2008.

Year-on-year Inflation by Commodity groups

Commodity group-wise examination shows that inflation in the groups of primary articles and manufactured products have mirrored the rising trend seen in overall inflation in the current week.

i.In ‘primary articles’, the rate of inflation increased to 11.6 per cent, compared to 10.9 per cent reported last week. In the sub-group of ‘food articles’, inflation, which had declined to single digit in the last fortnight, rose to 11.6 per cent in the week ended January 10, 2009 as against 9.5 per cent in the previous week, largely due to higher inflation in vegetables and milk. In ‘non-food articles’, inflation continued to decline to 7.1 per cent compared to 9.6 per cent in the previous week, while inflation in ‘minerals’ rose to 41 per cent versus 40 per cent last week due to higher inflation in non-metallic minerals as limestone and felspar.

ii.In ‘fuel and power’, the rate of inflation remained steady at (-) 1.3.

iii.In ‘manufactured products’, the inflation rate increased to 5.9 per cent, compared to 5.6 per cent last week. While most sub-groups recorded stable or declining rates of inflation, the sub-groups of sugar, khandsari and gur, textiles and canned/processed fish showed increase.

For the combined food index (weight = 25.43 per cent), the year-on-year inflation in the week ended January 10, 2009 was higher at 9.5 per cent compared to 7.9 per cent last week. Inflation in cereals, pulses and fruits continue to register inflation rates ranging from 9 to 20 per cent.

Contribution of Commodity groups

Contribution of primary articles to the year-on-year inflation rate for the week ending January 10, 2009 show that this group accounted for 46.9 per cent, as against their share of 22 per cent to the WPI basket. While the contribution of the fuel and power group was (-) 5.1 per cent vis-à-vis share of 14 per cent, that of manufactured products was 58.5 per cent against a share of 64 per cent in the commodity basket.

Inflation measured by CPI

Inflation recorded by the Consumer Price Index for Agricultural Labour (CPI AL) and for Rural Labour (CPI RL) has remained steady at 11 per cent during September – December 2008.