Inflation woes deepen, April CPI accelerates to 10.36% Consumer price-based food inflation accelerated to 10.18% in April from 8.22% in February, driven by a rise in prices of vegetables, eggs and fish products

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Inflation woes deepen, April CPI accelerates to 10.36%

 

Consumer price-based food inflation accelerated to 10.18% in April from 8.22% in February, driven by a rise in prices of vegetables, eggs and fish products

 

Mumbai: Decision making could become very difficult for the Reserve Bank of India as inflation is not just limited to food prices but has percolated into other sectors as well.

Inflation measured by the Consumer Price Index (CPI) has accelerated to 10.36% in April from 9.38% in March and 8.83% in February due to a sharp jump in prices across the board - from housing to transportation and communication to personal care products. The increase in CPI comes at a time when a sharp rise was seen in the Whole Price Index (WPI) to 7.23% in April, above the 6.89% growth in March.On a year on year basis, while vegetable prices surged 24% due to seasonal factors and waning base effect, milk and products also shot up 14.7%, and oil and fats rose 17.5% indicating that demand for protein based items continues to remain strong. This is because of the structural change in consumption patterns.

But the rise in prices has not been limited to food items. The consumer price index in housing was a very high 15.3% compared to last year, the index for clothing and bedding was up 11.7% and footwear gained 10.6%. Among the subgroups - medical care rose 6.2%, education, stationery etc climbed 7.2%, recreation and amusement rose 4%, transport and communication was up 8.6%, personal care and effects was up 7.5% and household requisites gained 11.1%.While increase in service tax during the budget can partly be the reason, Saugata Bhattacharya, chief economist at Axis Bank said, “Since growth is already sagging, the sharp jump in prices in the services component is not completely because of the demand driven factors but some of it could be imported because of the depreciating currency”. Rupee has depreciated around 7% in April alone. CPI in fuel and light climbed up 12.2% because electricity tariffs were hiked in some states during that period.
The readings from CPI and WPI indicate that inflationary pressures are intact, so will the Reserve Bank of India (RBI) pause after the 50 basis points rate cut in April? “RBI clearly indicated the importance of addressing inflationary pressures and the limited scope of measures in the last policy. The data per se are not going to materially impact RBI’s thinking but we expect the central bank to maintain status-quo in June,” said Deepali Bhargava, chief India economist, Espirito Santo Securities. Unless and until there is a credible fiscal consolidation plan by the government, the inflationary pressures are likely to ensure that RBI will remain in a wait and watch mode before reducing rates again.
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For rural India, retail-level inflation rose to 9.86% in April from 8.7% in the previous month and for urban India, it accelerated to 11.1% from 10.3% during the same period.
Price data for the new consumer index is collected from 310 towns and 1,181 villages. While the National Sample Survey Organisation is collecting data for urban centres, the statistics ministry has enlisted the postal department to collect price data from villages.
The new indices have calendar 2010 as the base year, which will be shifted to 2011-12 once the 68th consumer expenditure survey is released.
Most central banks in the world use CPI-based inflation to decide their monetary policy framework. This is because CPI represents the public consumption basket and is also used in many countries as the measure for indexing public sector wages and pensions, and as the standard benchmark for wage negotiations in the private sector.
 http://www.livemint.com/2012/05/18113003/Inflation-woes-deepen-April-C.html