Headline inflation for month of May surges to 9.06%

The wholesale price index (WPI) inflation numbers for month of May 2011 stood to 9.06%, this higher-than-expected increase in inflation is because of increase in prices of the manufactured products which stood at 7.2%. It is serious concern for the nation’s sustainable development, and this increase shows that the inflationary pressures are high despite the central bank's aggressive monetary stance. The present economic scenario in the economy is making obvious for RBI’s 25 basis point hike in its key policy rates.

According to the data released by the ministry of commerce and industry, the WPI for ‘All Commodities' (Base: 2004-05 = 100) for the month May, 2011 rose by 0.7 percent to 151.7 (Provisional) from 150.6 (Provisional) for the previous month. This increase in inflation was due to increase in the inflation in manufactured goods space which has increased more than 2% from November 2010, for month of May 2011 increased by 7.27% (y-o-y). Though on Y-o-Y basis, there is moderation is primary articles, food articles and fuel and power that stood at 11.3%, 8.37% and 12.32% respectively.

Looking at the different segments of WPI inflation, it is clearly visible that the May inflation is driven by higher manufactured products price which increased 7.27% (Y-o-Y) from 6.18% for last month. The manufactured products accounts for around 65% of wholesale price index. The index for manufacturing sector rose by 1% to 137.2 from 135.8 for the last month.

On Month-on-Month basis, the index for Primary Articles rose by 0.3% to 192.1 (provisional) from 191.6 (Provisional) for the last month. The index for food articles rose by 1.6% to 186.5 (provisional) from 183.5 (provisional) for the previous month. On Y-o-Y food articles stood to 8.37% as against 8.71% of last month. The index for ‘Non-Food Articles’ declined by 4.4% to 184.5 (provisional) from 192.9 (provisional). 

The index for the fuel and power which has weight of almost 15% in the WPI stood at 12.32 % (Y-o-Y). the index of fuel and power rose by 0.3% to 160.4% (provisional) from 159.9 (provisional) for the previous month due to higher prices of lubricants (5%), petrol, light diesel oil and bitumen (4% each), furnace oil and lignite (2% each) and aviation turbine fuel (1%). However, the prices of coke (6%) showed moderation.

Further, the WPI inflation in March this year has been revised upward to 9.68 % from the provisional 9.04 %. This upward revision too is more than the market expectations.