July WPI inflation at 4-month high of 5.79%

May WPI inflation revised to 4.58% from 4.70%

Driven by vegetables, wholesale price index-based inflation again moved out of the comfort zone of the Reserve Bank of India to stand at 5.79 per cent in July against 4.86 per cent in the previous month. The rate was 7.52 per cent in July 2012.

Fuel prices also showed a rise in inflation and manufactured items saw a bit of increase in the rate of rise over the period.

Inflation in vegetables soared to 46.59 per cent in July versus 16.42 per cent in June. It was 5.21 per cent in May and had declined in March and April, year-on-year. Economists had warned at the time that these could rise again once the rains came, due to supply disruption.

Within food, the rate of price rise in onions surged to 144.94 per cent in July against 114 per cent in June. However, onion has just 0.17 per cent weight in the overall WPI. This meant of the 0.93 percentage point increase in inflation, onions contributed 0.28 percentage points, according to data provided by office of the economic advisor, SBI Research.  This caused overall food inflation to rise to 11.91 per cent against 9.74 per cent over the period. Surprisingly, retail price index-based food inflation in July softened to 11.24 per cent from 11.84 per cent in June.

In contrast to vegetable inflation, the rate of price rise in fruits fell to 4.80 per cent in July year-on-year against a 0.43 per cent fall in June.

Inflation in fuel and power rose to 11.31 per cent against 7.12 per cent over the period, as petrol became dearer by 1.33 per cent against a price fall of 7.8 per cent and diesel turned more expensive by 26.34 per cent in July against 22.77 per cent in June. Now, oil marketing firms are allowed to raise diesel and petrol prices in small doses every month.

Manufactured items saw inflation rising marginally to 2.81 per cent in July against 2.75 per cent in June.

One of the largest items of imports, edible oils, saw prices falling by 2.23 per cent in July against flat inflation the previous month.

Planning Commission deputy chairman Montek Singh Ahluwalia said the rise in inflation was mainly on account of depreciation in the currency against the dollar and hoped that as the supply side improved, food inflation would come down.

MARGIN SHIELD

CRISIL’s Core Inflation Indicator (CCII), which excludes metal prices from the Wholesale Price Index (WPI) manufacturing index, rose to 3.7 per cent in July, after falling for five consecutive months. While non-food manufacturing inflation, the Reserve Bank of India's measure of demand-side pressure on prices, also rose, CCII remained above it. Non-food manufacturing inflation rose to 2.4 per cent in July after falling for 10 consecutive months. If not for falling metal prices, July's rise in non-food manufacturing inflation would have been even higher. Metal prices should be excluded in measuring domestic demand-side pressures, as price movements in metals are largely influenced by changing global demand and exchange rate volatility. Higher CCII and rising non-food manufacturing inflation appear to indicate that despite weak demand, firms are passing-though at least some of their rising input costs — particularly on account of a weak rupee and higher fuel prices — in a bid to protect margins.

Wholesale Price Index (WPI) Inflation in %

Jul,12	Aug,12	Sep,12	Oct,12	Nov,12	Dec,12	Jan,13	Feb,13	Mar,13	Apr,13	May,13	June,13	Jul,13
7.52	8.01	8.07	7.32	7.24	7.31	7.31	7.28	5.96	4.89	4.7	4.86	5.79

Consumer Price Index (CPI) Inflation in %

July,12	Aug,12	Sept,12	Oct,12	Nov,12	Dec,12	Jan,13	Feb,13	Mar, 13	April,13	May,13	June,13	July,13
9.86	10.03	9.73	9.75	9.9	10.56	10.79	10.91	10.39	9.39	9.31	9.87	9.64

Note:WPI has a base year of 2004-05
CPI inflation has a base year of 2010

Source:Commerce & Industry Ministry, Ministry of Statistics and Programme Implementation