|
India' WPI inflation for March 2011 has surged to 8.98% from 8.31% in February 2011. India's WPI based inflation has remained above 8% mark for 15 sequential months, while it was sharply above the RBI's projection of 8.0% for March 2011. On a yearly average basis, India's WPI based inflation has surged to 17 years high of 9.4% during 2010-11, next only to previous highest annual inflation at 12.6% way back in 1994-95. The inflation increased in March 2011, primarily due to hike in coal prices and increase in raw cotton, cotton yarn and fabric prices etc. On the other hand, high base for sugarcane, diesel, crude petroleum etc and moderation in prices of spices, vegetable and milk etc restricted further rise in inflation during March 2011.
The inflation for primary articles eased to 13.0% in March 2011 from 18.8% in February 2011, but the inflation for manufactured products and fuel & power group increased to 6.2% and 12.9%, respectively, in March 2011. However, the inflation reading for December 2010 has been revised sharply upward to 9.4% from 8.2% reported earlier.
The rise in wholesale price index during March 2011 at 8.98% was sharply above the expectations. As per Capital Market's poll of economist, the WPI inflation for March 2011 was expected to remain steady 8.3%. The economists responding to the poll had projected the inflation in the range of 7.7% to 8.6% for March 2011. The median of various forecasts of inflation projections for March 2011 had stood at 8.3%.
The inflation for primary articles has eased to 13.0% in March 2011 from 14.8% in March 2011. The fall in the inflation for primary articles was driven by sharp fall in inflation for food articles (from 10.7% to 9.5%), non-food articles (from 29.8% to 25.9%) and minerals (from 16.8% to 12.2%).
The inflation for minerals group, under primary articles group, eased from 16.8% in February 2011 to 12.2% in March 2011. Within the minerals group, the inflation for copper ore declined to 24.0% from 33.6%. Meanwhile, the inflation for crude petroleum dipped from 13.1% in February to 6.3% in March 2011, due to high base effect.
The inflation for fuel and power group inched up to 12.9% in March 2011 from 11.5% in February 2011. The fuel group inflation inched up mainly as the Coal India raised the coal prices in the end February 2011. The inflation for coal surged to 15.9% in March from 0.0% in February 2011.
The inflation for manufactured product surged to 6.2% in March 2011 from 4.9% in February 2011. Within Manufactured group, the inflation for food products increased to 2.4% in March 2011, snapping negative growth for last two sequential months, led by rise in inflation for sugar (from -15.6% to -7.5%), and rice bran oil (from 1.7% to 12.1%).
India witnesses sharp deceleration in food inflation, but at the same time, there is acceleration in non-food inflation. With the global commodity prices, including crude oil, metals, petrochemicals etc hardening, the risk of further rise in non-food inflation has worsened. On the other hand, if the South West Monsoons 2011 is normal or better, it can boost agricultural production, and help moderate the food prices further. Meanwhile, the recent softness in prices of edible oil, copper etc adds to comfort. Coupled with slightly higher base, there could be some moderation in WPI based inflation in April 2011. Still, considering unacceptably higher level of inflation, despite sluggish growth, including fall in capital goods production, RBI may have to hike interest rates, in the ensuing policy meet on 3rd May 2011, and subsequently too. While growth is sluggish, the over-riding focus will still remain on taming inflation and inflationary expectations.
|