Offering a temporary respite of sorts, headline inflation eased marginally to 8.66 per cent in April from 9.04 per cent in March — revised upward from the provisional estimate of 8.98 per cent — owing to a moderation in prices of food and manufactured goods.
The Wholesale Price Index (WPI) data on overall inflation released here on Monday for April shows that even as the price spiral is lower than the 9 per cent average projected by the Reserve Bank of India for the first half of the fiscal following a significant moderation in the rate of price rise in food and manufactured items, the breather may be short-lived owing to the cascading impact of higher fuel prices which are yet to be factored in.
Considering that the oil marketing companies (OMCs) hiked petrol prices by about Rs.5 a litre late last week and an increase in the administered prices of diesel and cooking gas (LPG) is expected to be announced any day during the month, a fresh bout of inflation is certainly on the cards. In the event, the inflation figures for May, to be released next month, will reflect the impact of higher retail prices of fuel products.
For the present, however, the substantial moderation in headline inflation has brought some cheer and Finance Minister Pranab Mukherjee hoped that the declining trend would continue in the coming months. “The April prices have come down both on the manufacturing sector and food sector...Therefore, this is [a] good trend and if it continues, then perhaps it will be more moderated,” he said while pointing out that these are not the ‘kind of inflation figures' that he is ‘comfortable' with.
Mr. Mukherjee, according to an official statement, admitted that there would be some impact on overall inflation due to the adjustment in petrol prices effected by the OMCs in the coming months. Also, “the international scenario on commodity prices also does not appear good at present,” he said.
Chief Economic Advisor Kaushik Basu said that headline inflation in April has been ‘on line' with government expectations and in keeping with his projection of 8.50-8.60 per cent for the month.
As per the WPI data, while inflation in food items eased to 8.71 per cent in April from 9.47 per cent in March, the rate of price rise in manufactured products, which account for the highest weight of 64.9 per cent in the WPI basket, also moderated to 6.18 per cent from 6.50 per cent on a month-on-month basis.
Apart from the upward revision of WPI inflation in March to 9.04 per cent owing to incorporation of data for metal products which had been left out earlier owing to “a programming error”, the figure for February has been revised up to 9.54 per cent from the provisional estimate of 8.31 per cent.
According to Crisil's chief economist D. K. Joshi, headline inflation in April has remained at a high level despite the high base of 10.88 per cent in April 2010.
“High global commodity prices remain a matter of concern, with crude still hovering around $100 a barrel despite the recent fall. Besides, the hike in petrol prices and the expected revision of diesel and LPG prices is likely to put further pressure and take headline inflation to around nine per cent,” he said. In April, the basket for primary articles, including food, non-food and minerals, turned expensive by 12.05 per cent on an annual basis. Prices of food articles were up by 8.71 per cent while non-food primary articles were dearer by 27.33 per cent and minerals by 7.41 per cent.
