inflation in india2011

8/6/2019 Inflation in India2011

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India Inflation Rate

The inflation rate in India was last reported at 8.72 percentin May of 2011. From 1969 until 2010, the average inflation

rate in India was 7.99 percent reaching an historical high of

34.68 percent in September of 1974 and a record low of -

11.31 percent in May of 1976. Inflation rate refers to a

general rise in prices measured against a standard level of

purchasing power. The most well known measures of

Inflation are the CPI which measures consumer prices, andthe GDP deflator, which measures inflation in the whole of

the domestic economy. This page includes: India Inflation

Rate chart, historical data and news.

Country Indicator Reference Actual Previous Next Release Impac

India Inflation Rate May/2011 8.72 9.41

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In mainstream economics, the word inflation refers to a general rise in prices measured against

a standard level of purchasing power. Previously the term was used to refer to an increase in the

money supply, which is now referred to as expansionary monetary policy or monetary inflation.Inflation is measured by comparing two sets of goods at two points in time, and computing theincrease in cost not reflected by an increase in quality. There are, therefore, many measures of

inflation depending on the specific circumstances.

The most well known are the CPI which measures consumer prices, and the GDP deflator, whichmeasures inflation in the whole of the domestic economy.The prevailing view in mainstream

economics is that inflation is caused by the interaction of the supply of money with output andinterest rates. Mainstream economist views can be broadly divided into two camps: the

"monetarists" who believe that monetary effects dominate all others in setting the rate ofinflation, and the "Keynesians" who believe that the interaction of money, interest and output

dominate over other effects. Other theories, such as those of the Austrian school of economics,believe that an inflation of overall prices is a result from an increase in the supply of money by

central banking authorities.

Related concepts include: deflation, a general falling level of prices; disinflation, the reduction ofthe rate of inflation; hyper-inflation, an out-of-control inflationary spiral; stagflation, a

combination of inflation and poor economic growth; and reflation, which is an attempt to raiseprices to counteract deflationary pressures(source: wikipedia).June inflation hits 9.44% on July 14, 2011

Delhi, July 14, 2011: Inflation for the month of June surged to 9.44 per cent from 9.06 per cent in May.

The food price index was up 8.31 per cent for week ended July 2 as against 7.61 per cent in the previous

week. Food data earlier had reached a seven-week low of 7. 61 per cent in the last week. During theweek, primary articles inflation stood at 11.58 per cent versus 11.56 per cent in the previous week. Fuel

inflation, surprisingly, dropped to 11.89 per cent versus 12.67 per cent the earlier week. Indian inflation

accelerated faster than expected in May to 9.06 percent, with higher manufacturing prices offsetting

slower growth in fuel and food costs. Last week the data did show some signs of respite

but this weeks data has once again raised concerns. The figures, however, have come in slightly lower

than street expectation. A Reuters poll had seen inflation coming in at 9.7 per cent.

The Reserve Bank of India is now expected to raise rates for the eleventh time since March 2010 at its

monetary policy review on July 26. The market expects the Reserve Bank of India (RBI) to raise key rates

by 25 basis points (bps)at the review. Chairman of the Planning Commission Montek Singh Ahluwalia

said India's June inflation was on expected lines and attributed the high number to the fuel price hike.

Food inflation fell to 7.61% on July 07, 2011

New Delhi, July 7, 2011 (PTI): Food inflation in India fell to a seven-week low of 7.61 per cent for the

week ended June 25 on the back of cheaper vegetables, pulses and potatoes. Food inflation, as

measured by the Wholesale Price Index (WPI), stood at 7.78 per cent during the previous week. It was

almost 20 per cent during the comparable period of June, 2010. As per data released by the government

Thursday, pulses became over 9 per cent cheaper year-on-year during the period under review. Prices of

vegetables also came down by 8.74 per cent, while potatoes became 2.13 per cent cheaper on an annual

basis. However, prices of other food items remained high during the week.

Fruits became 22.75 per cent more expensive, while onions became dearer by 21.24 per cent year-on-


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year. Eggs, meat and fish prices were up by 10.12 per cent and cereals by 4.26 per cent. Milk was 12.10

per cent costlier on an annual basis. The latest numbers on the rate of price rise of food items are the

lowest since the week ended May 7, when food inflation stood at 7.47 per cent. Headline inflation in the

country stood at 9.06 per cent in May. Finance Minister Pranab Mukherjee had on Wednesday cautioned

against the "suppressed component" of inflation. "There is a significant suppressed component of inflation

as the increase in international crude oil prices has not been passed on completely despite increase in

domestic administered oil prices effected in June, 2010, and June, 2011," he said.

Food inflation rises to 7.78% on June 30, 2011

NEW DELHI, June 30, 2011 (Reuters) - India's food price index rose 7.78 percent and the fuel price

index climbed 12.98 percent in the year to June 18, government data showed on Thursday. In the

previous week, annual food and fuel inflation stood at 9.13 percent and 12.84 percent respectively.

The primary articles price index was up 11.84 percent, compared with an annual rise of 12.62 percent a

week earlier. India's central bank raised key interest rate this month for the 10th time in just over a year to

combat sticky inflation, currently hovering above 9 percent, and signalled more increases to come even

as growth in Asia's third-largest economy is slowing down.

Food inflation rises to 9.13% on June 23, 2011

NEW DELHI, June 23, 2011: Food inflation in the country touched a two-and-half-month high of 9.13 per

cent in the week ended June 11 on the back of costlier fruits, milk, onions and protein-based items. Food

inflation, as measured by the Wholesale Price Index (WPI), stood at 8.96 per cent during the previous

week. It was almost 23 per cent during

the second week of June, 2010.

Food inflation has crossed the 9 per cent mark after a gap of one week. The latest food inflation

numbers are the highest since the week ended March 26, 2011, when the rate of price rise of food items

touched 9.18 per cent. As per data released by the government today, fruits became dearer by 28.66 per

cent year-on-year, while milk grew 15.30 per cent more expensive. During the week under review, prices

of onions went up by 11.89 per cent and eggs, meat and fish by 10.56 per cent on an annual basis.

Cereals were also up 4.32 per cent and potatoes became dearer by 0.71 per cent. However, prices of

pulses, wheat and vegetables went down during the week. While pulses became 10.34 per cent cheaper,

wheat was down 1 percent and vegetables 9.27 per cent.Meanwhile, inflation of non-food primary articles stood at 18.43 per cent for the week ended June 11 as

against 20.20 per cent during the previous week. Fibres grew more expensive by 43.77 per cent and

minerals by 25.90 per cent. Fuel and power became dearer by 12.84 per cent and petrol was up33.23 per

cent year-on-year.

India's food inflation rate rose to 8.96 per cent on June 16, 2011

NEW DELHI, June 16, 2011 (Reuters): The food price index rose 8.96 percent and the fuel price index

climbed 12.84 percent in the year to June 4, government data showed on Thursday. In the previous

week, annual food and fuel inflation stood at 9.01 percent and 12.46 percent respectively. The primary

articles price index was up 12.86 percent, compared with an annual rise of 11.52 percent a week earlier.

The weekly food inflation has eased after staying in double digits for much of 2010, but headline inflation

at 9.06 percent in May remains considerably above the central bank's comfort level .The Reserve Bank of

India (RBI) is widely seen lifting key policy rate by 25 basis points on Thursday at i ts mid-quarter policy

review in a bid to cool surging inflation. This would be the tenth rate increase since mid-March 2010.


NEW DELHI, June 9, 2011 (Reuters) - The food price index rose 9.01 percent and the fuel price index

climbed 12.46 percent in the year to May 28, government data showed on Thursday. In the previous

week, annual food and fuel inflation stood at 8.06 percent and 12.54 percent respectively. The primary

articles price index was up 11.52 percent, compared with an annual rise of 10.87 percent a week earlier.

The weekly food inflation has eased after staying in double digits for much of 2010, but headline inflation


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at 8.66 percent in April remains considerably above the central bank's comfort level and is seen

pressuring interest rates higher.


NEW DELHI, June 2, 2011 (Reuters): India's food price index rose 8.06 percent in the year to May 21,

government data showed on Thursday, slowing down from an annual rise of 8.55 percent a week ago.

The fuel price index climbed 12.54 percent compared with a rise of 12.11 percent a week earlier. Theprimary articles price index was up 10.87 percent, compared with an annual rise of 11.60 percent a week

earlier.

The weekly food inflation has slowed from the double-digit rise for much of 2010, but headline inflation at

8.66 percent in April remains considerably above the central bank's comfort level and will pressure rates

higher.

India's food inflation rate rose to 8.55 per cent on May 26, 2011

New Delhi May 26, 2011 (PTI): Food inflation shot up to 8.55% for the week ended May 14, the highest

level in four weeks, as prices of fruits, cereals and protein-based items escalated. Food inflation, as

measured by the Wholesale Price Index (WPI), was on a declining trajectory for the previous three weeks.

The figure for the seven-day period under review was 1.08 percentage points higher than the 7.47%

inflation rate recorded in the previous week. During the week ended May 14, cereals became costlier by

5.03% year-on-year and prices of onions were up by 8.32%, official data released here showed. Prices of

fruit rose by 32.37%, milk by 5.53% and eggs, meat and fish by 8.26%. Rice also became 2.63% more

expensive and potatoes 0.17% costlier on an annual basis.

Food inflation remained in double digits for most of 2010, before showing signs of moderation from

March, 2011. Prices of vegetables and pulses declined by 1.46% and 9.49%, respectively. Also, wheat

became cheaper by 0.30% on an annual basis. On an annual basis, the primary articles category saw an

inflation rate of 11.60%. On the other hand, prices of non-food primary articles were up 23.22% during

the week under review. Fibres became dearer by almost 61%, while minerals were up 11.78%.

The government and Reserve Bank had said that in the months to come, inflationary pressure would be

more from core (non-food) items on account of high global prices of commodities, particularly crude.

India's food inflation rate eases to 7.70 per cent on May 12, 2011

New Delhi May 12, 2011 (Reuters): India's food price index rose 7.70% and the fuel price index climbed12.25% in the year to April 30, government data on Thursday showed. In the previous week, annual food

and fuel inflation stood at 8.53% and 13.53%, respectively.The primary articles price index was up

11.96%, compared with an annual rise of 12.11% a week earlier.

The RBI raised interest rates last week -- its ninth rate hike since March 2010 -- by a sharper-than-

expected 50 basis points and said fighting inflation was its priority, even at the expense of short-term

growth. The wholesale price index -based inflation, the most widely watched gauge of prices in India, rose

8.98% in March from a year earlier, higher than

February's 8.31% rise.

India's food inflation rate rose to 8.53 per cent on May 5, 2011

NEW DELHI, May 5, 2011 (Reuters): India's food price index rose 8.53 percent and the fuel price index

climbed 13.53 percent in the year to April 23, government data on Thursday showed. In the previousweek, annual food and fuel inflation stood at 8.76 percent and 13.53 percent, respectively.

The primary articles price index was up 12.11 percent, compared with an annual rise of 12.08 percent a

week earlier. The Reserve Bank of India raised interest rates by a bigger-than-expected 50 basis points

on Tuesday, its ninth rate hike

since March 2010, in a bid to moderate stubbornly high inflation.

The wholesale price index-based inflation, the most widely watched gauge of prices in India, rose 8.98

percent in March from a year earlier, higher than February's 8.31 percent rise.


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India's food inflation rate rises to 8.76 per cent on April 28, 2011

New Delhi, April 28, 2011: India's food inflation rate rose marginally to 8.76 per cent for the week ended

April 16 from 8.74 for the previous week, an official statement said here today, quoting provisional data.

The statement also said that the inflation rate for fuel and power had risen to 13.53 per cent from the

previous week's level of 13.05 per cent. According to the data released today, the prices of onions were

up 10.96 per cent from a year ago, fruits by 28.43 per cent, milk by 5.10 per cent, eggs, meat and fish by12.14 per cent, cereals by 4.49 %, rice by 2.08 % and wheat by 0.48 %

However, the prices of pulses were down 6.49 per cent from a year ago, vegetables by 0.21 per cent

and potatoes by 1.61 per cent. Overall, the annual rate of inflation for primary articles, which have a

weight of 20.12 per cent in the wholesale price index (WPI), with base year 2004-05, stood at 12.08 per

cent for the week ended April 16 as compared to 11.96 per cent for the previous week.

India's food inflation rate rises to 8.74 per cent on April 21, 2011

New Delhi, April 21, 2011: India's food inflation rate rose slightly to 8.74 per cent for the week ended

April 9 from 8.28 per cent for the previous week, an official statement said here today, quoting provisional

data. The statement also said that the inflation rate for fuel and power had risen marginally to 13.05 per

cent from the previous week's level of 12.97%

According to the data released today, the prices of vegetables were up 1.53 per cent from a year ago,

potatoes by 1.21 per cent, onions by 8.28 per cent, fruits by 25.15 per cent, milk by 4.05 per cent, eggs,

meat and fish by 14.96 per cent, cereals y 4.48 per cent, rice by 2.08 per cent and wheat by 1.31 per

cent.

However, the prices of pulses were down 5.67 per cent from a year ago, the statement said. Overall, the

annual rate of inflation for primary articles, which have a weight of 20.12 per cent in the wholesale price

index (WPI), with base year 2004-05, stood at 11.96 per cent for the week ended April 9 as compared to

11.40 per cent for the previous week. The index for this group rose by 0.2 per cent to 190.9 from 190.6 for

the previous week, the statement said.

India's food inflation rate declines to 9.18 per cent on April 7, 2011

New Delhi, April 7, 2011: India's food inflation fell to a single digit at 9.18 per cent for the week ended

March 26 on account of a decline in prices of potatoes, pulses and wheat. Food inflation stood at 9.50 per

cent in the previous week. The rate of price rise of food items has fallen to a single-digit figure for thesecond time For the week under review, prices of vegetables were up 11.41% from a year ago, potatos

by 5.30%, Onion by 8.48%, fruits by 25.49%, milk by 3.87%, wheat by 0.29 per cent

India's food inflation rate rise to 10.05 per cent on March 24, 2011

New Delhi, March 24 (IANS) India's annual rate of food inflation rose to 10.05 percent for the week

ended March 12 -- after three straight weeks of decline, official data showed Thursday. Food inflation,

which was on a downtrend since early March, was registered at 9.42 percent for the week ending March

5. Limited data on the wholesale price index released by the commerce and industry ministry also

showed a spike in the index for primary articles which rose from 12.31 to 13.53 percent for the week

under review, while that for fuel remained unchanged at 12.79 percent.

India's inflation rate continues to remain sharply higher than the comfort zone of both the Reserve Bank

of India's 4-5 percent and the government, which earlier said the prices will be reined in to no more than 5percent.

India's food inflation rate declines to 9.42 per cent on March 17, 2011

New Delhi, March 17, 2011: India's food inflation rate declined slightly to 9.42 per cent for the week

ended March 5 from 9.52 per cent for the previous week, an official statement said here today, quoting

provisional data. The inflation rate for fuel and power, however, rose to 12.79 per cent from the previous

week's level of 9.48 per cent, it said. According to the data released today, the prices of vegetables were

up 8.71 per cent from a year ago, onions by 6.65 per cent, fruits by 19.39 per cent, milk by 7.16 per cent,


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eggs, meat and fish by 13.10 per cent, cereals by 3.88 per cent, rice by 2.75 per cent and wheat by 0.69

per cent. However, the prices of pulses were dow by 3.05 per cent and potatoes by 9.27 per cent, the

statement said. Overall, the annual rate of inflation for primary articles, which have a weight of 20.12 per

cent in the WPI, with base year 2004-05, stood at 12.31 per cent for the week ended March 5 as

compared to 13.96 per cent

for the previous week. The index for this group remained unchanged its previous week's level of 186.1,

the provisional data showed.


New Delhi, March 10, 2011 (PTI): After a gap of nearly three months, food inflation fell to a single digit at

9.52 per cent for the week ended February 26 on account of a decline in prices of potatoes, pulses and

wheat. Food inflation stood at 10.39 per cent in the previous week. The rate of price rise of food items has

fallen to a single-digit figure for the first time since the week ended December 4, 2010, when it was 9.46

per cent. The latest figures are expected to give a breather to the government, which has been under

increasing pressure to rein in the inflationary pressure caused by high food and crude oil prices. For the

week under review, prices of wheat declined by 1.07 per cent on an annual basis, while pulses rates fell

by 3.91 per cent. Prices of potatoes also fell by nearly 9 per cent year-on-year. However, vegetables

continued to be expensive and their prices went up by 9.23 per cent on annual basis. In particular, onion

prices were up by 3.90 per cent year-on-year. Rice also became dearer by 1.16 per cent year-on-year.Egg, meat and fish became 15.38 per cent costlier. Meanwhile, fruits prices rose by 18.75 per cent and

milk by 8.42 per cent on an annual basis. The non-food articles category saw a price rise of 29.85 per

cent during the week on an annual basis. Fuel and power also became 9.48 per cent more expensive,

while petrol became costlier by 23.14 %.


New Delhi, March 3, 2011: India's food inflation rate declined to 10.39 per cent for the week ended

February 19 from 11.49 per cent in the previous week due to a fall in the prices of vegetables and onions,

among other things, an official statement said here today, quoting provisional data. The fall in the food

inflation rate will provide some relief to the Government, which has been under attack by the Opposition

for the past many months on the issue of high prices of food products. There was, however, a slight rise

in the inflation rate for fuel and power to 12.56 per cent from 12.14 per cent for the previous week.According to the data released today, the prices of vegetables were up 14.29 per cent from a year ago,

fruits by 16.34 per cent, milk by 11.07 per cent, eggs, meat and fish by 14.50 per cent, cereals by 2.01

per cent and rice by 2.38 per cent. However, the prices of onions were down 3.64 per cent, pulses by

5.02 per cent, potatoes by 12.66 per cent, and wheat by 2.06 per cent. Overall, the annual rate of inflation

for primary articles, which have a weight of 20.12 per cent in the WPI, with base year 2004-05, stood at

14.85 per cent for the week ended February 19 as compared to 15.77 for the previous week.

Food inflation rises to 11.49 percent on February 24, 2011

New Delhi, February 24, 2011 (IANS): India's annual food inflation rose to 11.49 percent for the week

ended Feb 12, according to official data released Thursday. The data showed that the food inflation has

marginally increased 0.44 percentage points from 11.05 percent recorded in the previous week. The

annual inflation based on wholesale prices was 8.23 percent in January, while it stood at 8.43 percent in

December, 2010.

Commenting on the inflation rate Prime Minister Manmohan Singh informed Lok Sabha that food

inflation would come down with the overall inflation to be no more than 7 percent by March-end. 'By the

end of this fiscal year, inflation will be controlled. I expect the situation to improve,' Manmohan Singh told

the Lok Sabha, replying to a debate on the motion of thanks to the president's address. Meanwhile, the

annual inflation for primary articles was up 15.77 percent during the week ended Feb 12, in the latest

week, compared to 14.59 percent in the previous week. Whereas, the fuel price index rose to 12.14

percent from the previous week's 11.92 percent.


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India food inflation declines to 11.05 percent on February 17, 2011

NEW DELHI, February 17, 2011: India's food inflation eased to a nine-week low, helped by a steep fall in

the prices of vegetables such as onions and firming expectations of a sustained downtrend in overall

inflationary pressures. The food inflation rate slowed to 11.05% year-on-year in the week ended Feb. 5,

compared to the 13.07% recorded a week earlier, according to data issued Thursday by the Ministry of

Commerce and Industry. On a week-on-week basis, the wholesale price index for food articles fell 2.1%to 182.9.

This is the second week of a fall in food prices as a series of government measures to augment supplies

begin to show effect. The data will cement expectations that price pressures will continue to ebb, reducing

the urgency for the central bank to tighten its monetary policy more. Still, economists are concerned

about inflation remaining at high levels, and the likely pressure from rising global commodity prices.

India food inflation declines to 13.07 percent on February 10, 2011

New Delhi, February 10, 2011 (PTI): Food inflation declined to a seven-week low of 13.07 per cent in

end-January, as prices of potatoes and pulses eased, even as consumers continue to feel the pinch of

high rates of vegetables.Food inflation, which snapped the three-week rising trend, fell by nearly 4

percentage points from 17.05 per cent in the week ended January 22. It was 22.08 per cent a year-go.

The last time food inflation has come down to such a level was for the week ended December 11 when it

stood at 12.13 per cent. Experts said there would be further slide in inflation rates due to the expected

record crop of wheat and pulses.

Government estimates suggest overall food grain production for 2010-11 at 232.07 million tonnes, against

218.2 million tonnes last year. Wheat production is estimated to touch an all-time high of 81.47 million

tonnes in 2010-11 crop year. Pulses and cotton production are also projected to set fresh records of

16.51 million tonnes and 33.9 million bales, respectively. In the coming weeks we could expect further

moderation in food prices, specially foodgrains. The expected record production of wheat and pulses will

act as a factor in easing the food prices, Crisil chief economist D K Joshi said. However, the decline in

food inflation is unlikely to show much impact on the headline inflation numbers for January, which is

expected on February 14. The inflation in December stood at 8.43 per cent. The overall WPI inflation for

January 2011 is expected at around 8.5 per cent, on back of high primary inflation, ICRA economist Aditi

Nayar said.The decline in food inflation numbers is also unlikely to ease pressure on Reserve Bank, whose current

monetary policy stance is anti-inflationary. The apex bank had last month raised short term lending and

borrowing rates by 25 basis points to tame rising prices.

India food inflation rose at 17.05 percent on February 3, 2011

NEW DELHI, February 03, 2011: Food inflation soared to 17.05 per cent for the week ended January

22, rising for the

second straight week, on the back of costlier vegetables, fruits and milk. Food inflation rose by 1.48

percentage points from 15.57 per cent in the previous week. The food inflation last year had stood at

20.56 per cent. On an annual basis, onion prices rose by 130.41 per cent in the third week of January,

although they have moderated considerably in the recent days. Vegetables as a whole have became

dearer by 77.05 per cent on an annual basis as potato prices rose by 6.22 per cent. Fruits and milk

became costlier by 15.47 per cent and 11.41 per cent on a year on year basis respectively, data released

by the government showed. In the non-food items, fuel inflation rose by 0.66 per cent during the week

after the oil marketing companies raised petrol prices by about Rs 2.50 a litre.

"Fuel and Power" category showed an increase of 11.61 per cent year-on-year. The rise in latest food

inflation figure is likely to put further pressure on the government grappling with expensive food

commodities and a slowing industrial growth that dipped to the 18-month low of 2.7 per cent for

November. The overall inflation forDecember rose to 8.43 per cent, from 7.48 per cent in the previous

month.


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India food inflation rose at 15.57 percent on January 27, 2011

NEW DELHI January 27, 2011 (Reuters): India's food price index rose 15.57 percent and the fuel price

index climbed 10.87 percent in the year to Jan. 15, government data on Thursday showed. In the prior

week, annual food and fuel inflation stood at 15.52 percent and 11.53 percent. The primary articles price

index was up 17.26 percent in the latest

week, compared with an annual rise of 17.03 percent a week earlier. The wholesale price indexINWPI=ECI, the most widely watched gauge of prices in India, rose 8.43 percent in December from a

year earlier, compared with 7.48 percent in November.

India's food inflation rate eases to 15.52% on January 20, 2011

New Delhi, January 20, 2011: Food inflation has dropped to 15.52 per cent for the week ended January

8 from 16.91 per cent recorded in the previous week on the back of high vegetable prices. Onions, in

particular, continue to burn a hole in the pockets of common people. Primary articles inflation for the week

stood at 17.03 per cent, a drop from 17.58 per cent in the previous week. Figures for the fuel group

remained unchanged at 11.53 per cent.

Unlike previous occasions, the inflation is not driven by prices of food grains or global prices. The sharp

rise in prices of essential commodities such as fruits, vegetables, milk, eggs, meat and fish, which have

10 per cent weightage on the WPI (wholesale price index), is pushing the inflation beyond control.

The Reserve Bank of India (RBI) recently said that food inflation seems to be pointing towards changing

consumption patterns as India gets more affluent and people move towards more high value

commodities.:

India's food inflation rate eases to 16.91% on January 13, 2011

New Delhi, January 13, 2011: India's food inflation rate eased to 16.91 per cent for the week ended

January 1, 2011 from 18.32 per cent in the previous week, an official statement said here today, quoting

provisional data. The statement shoed that the inflation rate for fuel also declined slightly to 11.53 per

cent from the previous week's level of 11.63 per cent.

The dip in the inflation rate comes at a tie when the government is grappling with high food prices and is

facing increasing flak from the Opposition and other quarters about its performance on this front.

According to the data released today, the prices of onions were up 70.70 per cent from a year ago,

vegetables by 70.73 per cent, rice by 1.34 per cent, fruits by 17.71 per cent, milk by 13.20 per cent andeggs, fish and meat by 16.70 per cent.

However, the prices of wheat were down by 4.87 per cent, pulses by 14.84 per cent, cereals by 0.12 per

cent and potatoes by 1.67 per cent.

Overall, the annual rate of inflation for primary articles, which have a weight of 20.12 per cent in the

WPI, with base year 2004-05, stood at 17.58 per cent for the week ended January 1, 2011 as compared

to 20.20 per cent for the previous week.


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Indias core inflation a note

By Amol Agrawal

On March 19 2010, RBI increased interest rates before the official policy. The main reason was

rise in inflation and inflationary expectations.

Anchoring inflation expectations and containing overall inflation have become imperative.

Headline WPI inflation on a year-on-year basis at 9.9 per cent in February 2010 has exceededour baseline projection of 8.5 for end-March 2010 set out in the Third Quarter Review.

Year-on-year WPI non-food manufacturing products (weight: 52.2 per cent) inflation, which was

negative (-0.4 per cent) in November 2009, turned marginally positive (0.7 per cent) inDecember 2009 and rose sharply thereafter to 2.8 per cent in January 2010 and further to 4.3

per cent in February 2010.Year-on-year fuel price inflation also surged from (-)0.8 per cent inNovember 2009 to 5.9 per cent in December 2009, to 6.9 per cent in January 2010 and further to

10.2 per cent in February 2010. With rising demand side pressures, there is risk that WPIinflation may cross double digits in March 2010.

Note the importance of non food manufacturing inflation.

Again in RBIs monetary policy held in April 2010, RBI Governor Mr D. Subbarao said:


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.the developments on the inflation front are worrisome. The headline inflation, as measuredby year-on-year variation in Wholesale Price Index (WPI), accelerated from 0.5 per cent in

September 2009 to 9.9 per cent in March 2010, exceeding the Reserve Banks baselineprojection of 8.5 per cent for March 2010 set out in the Third Quarter Review. Year-on-year

WPI non-food manufactured products (weight: 52.2 per cent) inflation, which was (-) 0.4 per

cent in November 2009, turned marginally positive to 0.7 per cent in December 2009 and rosesharply thereafter to 3.3 per cent in January 2010 and further to 4.7 per cent in March 2010

Clearly, WPI inflation is no longer driven by supply side factors alone. The contribution of non-food items to overall WPI inflation, which was negative at (-) 0.4 per cent in November 2009

rose sharply to 53.3 per cent by March 2010.

In both, RBI is talking about two measures of inflation. First is headline inflation and second isnon-food manufacturing products inflation. Though India does not have separate categories, we

could call the second one as core inflation. Ideally core inflation should also be based on CPIinflation but we dont have a reliable CPI measure as of yet.

Let us understand these two measures a bit. Headline inflation includes all the items in the WPIindex. Core inflation excludes certain items that face volatile price movements. Prices of certain

items are highly volatile like food and fuel items. These prices provide confusing signals topolicymakers. The prices of food and fuel items could increase sharply for few weeks and then

decline sharply. This makes headline inflation also volatile. If policymakers increase interestrates seeing the rise in headline inflation, they could be surprised by a sudden lower trend in

coming weeks. And monetary policy impacts economies with a lag, it complicates the policyfurther.

Hence, core inflation has emerged as an alternative for measuring inflation. In this, volatile items

like food prices and fuel items are excluded. However, some economists criticize using coreinflation as measure of inflation. As food and fuel are important items for consumption, they

should not be excluded from the inflation measure. A focus on core inflation will miss theoverall inflation trend. Suppose the prices of food and fuel increase for a prolonged period this

will not show in core inflation but in headline inflation. So, should the policymakers ignore theheadline inflation and focus on core inflation? Therefore, policymakers focus on both headline

and core inflation for their policymaking. Most economies report both measures of inflation.

In India, we do not report core inflation and only headline inflation is reported. However, coreinflation can be computed. WPI Inflation is divided into three broad categories

y Primary Articlesy Fuel Products and

y Manufacturing Items.

The first two categories include food articles and fuel items which can be excluded. The thirdcategory Manufacturing also includes food products which tends to be volatile as well and

moves in line with prices of primary articles. So after excluding food products frommanufacturing sector, we get non-food manufactured products inflation. This can also be called


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as core inflation for India (not very reliable though). The weight of Manufactured Products in thetotal WPI index is 63.8% and food products is 11.5%. So core inflation has items which

constitute about 52% of the total headline inflation.

The figure below shows movement of core inflation since Jan 2000. It peaked in August 2008 at

11.14% leading to multiple hikes at that time. The inflation then declined thereafter because ofthe global financial crisis. As RBI Governor states in his above mentioned statement, it wasnegative 0.4% in November 2009 and then increases sharply to 4.2% in February 2010. This

prompted RBI to increase its policy rates before monetary policy. RBI again increased its policyrates in April 2010 seeing continued rise in core inflation.

It will be important to keep looking at this measure of inflation. Though not as robust, it does

help in some way to understand demand-side inflation pressures in the economy. And this is

what keeps central banks interested as well. The

industrial houses as well as the policy makers are all worried with the constant increase of the inflation

in India. In economics, inflation refers a general increase in the prices measured against a general level

of the power to purchase. In earlier times this term used to refer to increase in money supply. This is

currently referred as monetary inflation or expansionary monetary policy. The measure of inflation is

measured by comparing two sets of goods at different times.

The computing for the increase in the cost which is not reflected by increase in the quality is carried


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out. The various measures of inflation depend on the particular circumstances. The most popularly

known method is the CPI. In this method the measures are the consumer prices, as well as the Gross

Domestic Product (GDP) deflator. In this way the total domestic economy is measure. The prevalent

view for economics (mainstream) is due to the interaction of the supply of money with output and

interest rates. The views of the economists are broadly divided in two camps- the "monetarists" and the

"Keynesians".

The related concepts for calculating inflation of a country comprise deflation, disinflation as well as

hyper-inflation. Deflation is in general the falling level of prices. The disinflation and the hyper-inflation

are all important aspects while calculating the inflation rate of a country.

Inflation Rate in India

The inflation rate in India was reported to be 9.3 percent in the month of January of 2011. Since the year

of 1969 till the year of 2010, the average inflation rate in India was 7.99 percent. The inflation rate of

the country reached an historical high of 34.68 percent during the month of September in the year of

1974. The lowest was recorded in the month of May in the year of 1976. It was reported to be as low as

-11.31. The inflation rate in general refers to the rise in the prices measured against the purchase power

at a standard level. The best known measure of Inflation is the CPI which measures the consumer prices.

The GDP deflator also measures inflation in the total domestic economy.

India Inflation Rate Chart

Year Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec

2011 9.30

2010 16.22 14.86 14.86 13.33 13.91 13.73 11.25 9.88 9.82 9.70 8.33 9.47

2009 10.45 9.63 8.03 8.70 8.63 9.29 11.89 11.72 11.64 11.49 13.51 14.97

2008 5.51 5.47 7.87 7.81 7.75 7.69 8.33 9.02 9.77 10.45 10.45 9.70

Inflation in India in Future


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It is expected that the emerging markets, including India, will perform well withstanding challenges like

higher inflation as well as the rising prices of the oils. It is assumed that the price of the commodity will

continue to maintain the upward march since the developing countries are maintaining a very strong

growth momentum motivated by the by robust consumption. The emerging markets will continue to do

well. The strong growth momentum is accelerating the growth. The emerging markets like India will

grow at 5.9 percent in this fiscal year 2011. The developed markets are growing at the rate of 1.6

percent. The emerging markets are experiencing the bull nature. The bear nature is short-lasting in

these economies. This bull phase is going through a 20 year high. The growing price of oil in the country

is the factor behind the growth of the price of all other commodities in India.

Food Inflation in India in March 2011

Food inflation reduced to a single digit- 9.5 per cent for the third week of March. The prices of pulses,

fruits, and the protein-based items remained very costly. The food inflation is based on wholesale price

index (WPI). This has risen to 10.05 per cent in the second week of March. In the third week the prices of

pulses fell by 4.40 per cent. The price of potato is rising by 8.39 per cent. The price of the onions also

increased by 6.23 per cent during the month of March (2011). However, the note-worthy matter is that

the prices of the fruits rose by 24.67 per cent every year. The price of the eggs, meat and fish rose by

15.34 per cent. The total inflation rate in India in the month of February (2011) was 8.31 per cent. We

have the shares of oil companies in the portfolio of our country. We also have companies in the areas of

iron ore, copper, platinum, nickel and coal. The per-capita income of a general Indian is on rise. Hence,

the demand for the commodity will remain strong going ahead. The energy consumption is going up in

the Asian countries as well as the other developing countries. So the fate of India can be predicted in the

field of price rise. Inflation in India is calculated on an annual basis on the Wholesale Price Index.

The Wholesale Price Index includes around 435 goods, based on which the rate of inflation is

calculated. However it is only in India that the rate of inflation is calculated on the WPI in other

countries the rate of inflation is calculated on the Consumer Price Index (CPI).

Inflation in India 2010 - 2011 was last recorded at 8.82 percent in the month of February.

Inflation in India in 2011 has already touched the 9 percent mark which is a matter of concern forthe economy. The rate of inflation in January 2011 was 9.30 which came down a little in

February. The rate of inflation over the last 45 years maintained an average of about 7.99percent. The rate of inflation generally refers to rise in the prices of goods and services measured

against a basic level of purchasing power of the people of the country. There are two well knowninstruments used to measure Inflation namely; the Consumer Price Index and the GDP deflator.

The Consumer Price Index measures consumer prices whereas the GDP deflator measures thetotal inflation of the domestic economy.

The results of Inflation can actually be seen in Indian when we end up buying lesser goods by

paying excess. Such a phenomenon mostly takes place when either there is too much moneysupply in the economy or there is less supply of goods and services. Over the years the one

common factor of inflation has been the increase in the supply of money. In order to give a boost


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to the GDP during the economic slowdown that India faced two years back, the government letloose its monetary policies. The rates of Interest were lowered so that people could have more

disposable incomes. To add to this the price of crude oil soar very high, this further fueled theinflationary pressure in India.

Threats like building deficits, real estate bubbles and manufacturing overcapacity also add to theinflationary trends in the future. One of the most prevailing types of inflation that has beenplaguing the country since decades is 'Food Inflation'. This is still one area where the

government of the country is yet to take notice about. Also the fast growing population, lack ofproper irrigation infrastructure, slow production capacity of land and water shortage is a matter

of concern for the future. These factors put together can account for high rates of inflation in thecountry.

Inflation is caused due to several economic factors

Below is listed the many reasons behind the cause of inflation in India in 2010-2011

y Inflation can be caused if the government prints notes in excess. If there is a lot of money

circulating in the market then prices increase just to keep pace with the increase in

currency.y Sometimes a country demands more goods and services than what it actually produces.

This type of inflation is known as Demands pull inflation.y Sometimes the price of a finished good is strikingly high, this happens mainly if there is

increase in its production and labor cost. This increase in the cost of the final product alsoleads to inflation.

y Inflation also occurs with increasing interest rates. Sometimes countries borrow money,which have high interest rates attached to it. The burden that this rate of interest causes

also results in inflation.y Consumer products that carry high taxes can also cause inflation.

y Sometimes if a commodity or product is unavailable in the market its prices tend to goup. This is known as Cost push inflation or supply shock inflation.

India Inflation Rate Table

Below is a chart that represents the different inflation rates recorded from the year 2008 to 2011:

Year Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec

2008 5.51 5.47 7.87 7.81 7.75 7.69 8.33 9.02 9.77 10.45 10.45 9.70

2009 10.45 9.63 8.03 8.70 8.63 9.29 11.89 11.72 11.64 11.49 13.51 14.97

2010 16.22 14.86 14.86 13.33 13.91 13.73 11.25 9.88 9.82 9.70 8.33 9.47


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2011 9.30 8.82

New Delhi, April 6:

Expressing concern over high food inflation, the Agriculture Minister, Mr Sharad Pawar, has

said the Government is taking all possible steps to keep inflation under control, but the success

of these measures depends on the production of foodgrains and other related commodities.

The government of India and state governments are concerned about inflation, especially of

high inflation of food articles in recent times, Mr Pawar said while addressing the Kharifconference here today.

Food inflation stood at 9.5 per cent for the week ended March 19 amid easing pulses prices, even

as fruits and protein-based items remained costly.

Food inflation based on the wholesale price index (WPI) had risen to 10.05 per cent for thepreceding week leading up to March 12 after remaining in single-digit for two weeks.

The Minister said high food inflation was partly due to the failure of the monsoon in many statesduring 2009-10 and partly due to increased income levels and a preference for high quality fruits

and vegetables, besides crop failures during certain periods, such as in the case of onions.

The Government is taking all possible measures to keep inflation under control, but success ofthese measures depends very largely on the production of foodgrains and other agriculture and

related commodities, he said.

The country is estimated to have produced 235.88 million tonnes of foodgrains in the 2010-11

crop year (July-June) against 218.11 mt in the previous year.

Govt committed to take steps to control

inflation: Pranab

PTI Jan 8, 2011, 02.34pm IST

Tags:

y Price rise|

y Pranab Mukherjee

NEW DELHI: Attributing rising inflation partly to stimulus and increasing global commodityprices, Finance Minister Pranab Mukherjee today said the government was committed to take all

steps to moderate price rise.

"We have to take all the necessary steps to keep inflation at moderate levels", he said whilespeaking at the 9th Pravasi Bhartiya Divas here.


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Mukherjee said the stimulus provided by the government to boost the economy in the aftermathof the global financial meltdown, among other things, was also responsible for rising prices.

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"In economy, every action has reaction. We have to face a situation where fiscal expansion led to

rise in fiscal deficit ... that led to unstable price regime coupled with the global commodity priceincrease. (These) are the current challenges of the policy makers," he added.

Led by spurt in prices of onion and other vegetables, the food inflation jumped to a year's high

level of 18.32 per cent on December 25.

The government had already taken tough action against hoarding to check rising prices,especially of onions.

To help the economy combat the impact of global financial crisis in 2008, the Reserve Bank aswell as the government had provided several stimulus packages.

These measures mainly included increasing money supply, lowering tax rates and hiking public

expenditure.

While asking the Indian diaspora to invest and contribute to country's growth and prosperity,

Mukherjee said the government was making efforts to achieve double-digit growth rate.

"The reform process has continued at times gradually, with new initiatives on the anvil," he said,adding the aim is to achieve 10 per cent growth rate.

"These policy measures are directed towards two major objectives. The first is to grow the

economic pie in a sustained manner and boost GDP growth to a long-term path of over ten percent per annum.

"The second is to take concrete steps in order to ensure equitable and inclusive distribution of the

fruits from this growth process", he added.

There are several steps to effectively control inflation before it gets out of hand. Given that

inflation shows the imbalance between supply and demand of goods at current prices so thatmeasures be taken to reduce demand or increase supply of goods and services. The following are

some important steps you should take into demand and supply.

The supply side


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Increased Production

The supply of goods and services can be increased by increasing agricultural and industrial

production. Agricultural production can be increased by providing an adequate supply ofagricultural inputs at low prices, the modernization of agriculture and scientific farm

management, adequate water supply for irrigation, industrial production etc similarly can beincreased by increased foreign direct investment, industrial credit growth, fiscal concessions, etc.

Control of illegal Activities

There are some illegal activities that cause significant inflation in a country. It is hoarding,

smuggling, profiteering, black markets, etc. In the case of smuggling of large quantities ofstaples like sugar, butter, wheat, rice, etc are exported abroad illegally in order to obtain higher

prices. Similarly, the shortage in most cases artificial staples to create higher profits. Allactivities of this evil must be controlled through advertising, as well as punishment.

Peace and Security

Production and distribution of goods and services can be effected due to the existence of uneaseand insecurity in society. In such circumstances, investors hesitant to invest for fear of potential

loss. Similarly, the production of industrial products is affected due to several unpleasant eventssuch as strikes public etcpor therefore peace and security must be ensured to maintain the supply

of goods and avoid the danger of famine.

Main Energy Sources

The supply of agricultural and industrial products is highly dependent on energy availability. If

the energy source is expensive, the cost of production of goods and services will be expensivetoo. Increased production costs raise prices and cause inflation. Therefore all necessary measuresbe taken to provide major sources of energy in industrial and agricultural sectors of the economy.

The demand side

Control of Money Supply

The money supply has a great influence on the rising inflation that is, inflation with increasingthe money supply and vice versa. Therefore, to control inflation, measures must be taken to

control the money supply. The money supply can be controlled with the help of monetary policyin which the central bank uses various methods, such as bank rate policy, open market

operations, changes in reserve requirements, credit rationing , direct action etc. All thesemethods are useful to control the rate of inflation in a country.


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There is no Deficit Financing

Deficit financing shows that public spending beyond their income. The purpose of deficit

financing is to meet the additional costs that the budget deficit. Because the money supplyincreases in the country and causes inflation. Therefore the deficit financing should be

discouraged and all development costs must be met through taxes and debt.

Population Control

In most developing countries, the population is increasing very quickly that the production of

goods and services does not increase at the same pace. Because the imbalance between supply

and demand of goods and services are produced and cause inflation. Therefore, to controlinflation, appropriate measures should be taken to control the population.

Fiscal Policy

Fiscal policy refers to government policy of public spending and taxes. The main fiscal policyobjective is to maintain only the slight change in the general price level. During inflation, thegovernment tries to reduce its expenditure on unproductive activities and the direct tax rateincreases so that the purchasing power of the population is reduced. Due to the reduction in the

purchase of the population, demand for goods and services will be reduced and controlledinflation.

Direct Measures

There are several other options available to the government to control inflation and wage and

price freeze, the rationing of goods, establishment of public service shops, the price review

committees, boards of price stabilization, etc. This direct measures are often used by thegovernment to control inflation.

inflation in india2011

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