The fall is partly due to the rising base effect
NEW DELHI: Bringing some respite to the common man — at least on paper — and raising hopes of a declining trend in the months ahead, the Wholesale Price Index (WPI)-based headline inflation softened to 9.59 per cent in April from 9.90 per cent in March, despite an increase in the prices of a number of food and non-food items.
The WPI data released here on Friday for the month showed that even as the provisional inflation figure for April at 9.59 per cent marks a decline from 9.90 per cent (provisional) in March and 10.06 per cent (revised) in February this year, the fall is partly due to the rising base effect. In April 2009, inflation was pegged at 1.31 per cent, slightly higher than 1.2 per cent in March that year.
Since the revised figures always work out higher than the provisional data, it is evident that the final numbers for March and possibly April would end up being in double digits as had been predicted by economic analysts as well as Finance Minister Pranab Mukherjee. “I will not be surprised, if it [inflation] reaches double digits in March,” he had said in Parliament. The only difference is that the breaching took place a month earlier in February as against the RBI projection of 8.5 per cent for the end of the fiscal.
According to Finance Ministry's Chief Economic Advisor Kaushik Basu, a fall in headline inflation would come about after three months of fluctuation and rise again in June due to the base effect. “For the next three months, there will be fluctuating trend in inflation following which it would see a fall,” he told reporters in Kolkata. The prime concern for the government now is that food inflation is seen as seeping into the manufacturing sector and non-food items, especially metals on account of hardening global prices. On a monthly basis, iron and steel prices surged 11.40 per cent in April while basic metal alloys and metal products turned 6.72 per cent dearer. The spread of inflation to non-food items is also evident in cotton textile prices rising by 15.66 per cent and chemical products turning more expensive by 5.67 per cent.
Commenting on the inflationary trend, Chief Statistician Pronab Sen said: “Fear of food inflation spreading to other sectors is still there. It will take a little bit of more time for it to come down. I hope inflation would see a declining trend hereafter.”
The general expectation is that headline inflation would be on the decline during the year and fall to 5.5 per cent by March next year, as has been projected by the apex bank for the current fiscal. This, however, is provided the monsoon is normal and food prices come down.
As of now, the April inflation data shows that potato prices fell 28.70 per cent during the month while onion prices also dropped 11.62 per cent. Sugar prices fell 5.74 per cent on a monthly basis, but were dearer as compared to last year. However, the prices of pulses went up by 2.47 per cent and milk by 2.96 per cent during the month while on a yearly basis, they were higher by 30.42 per cent and 21.95 per cent, respectively.