22.2.12

Consumer Price inflation






The combined consumer price inflation in January stood at an annual 7.65%, while food and beverages inflation was 4.11%, data released by the Central Statistics office (CSO) showed. This was the first consumer price inflation (CPI) data released by the CSO. There has been a demand to release CPI data as it reflects price pressures better than the numbers based on the wholesale price inflation (WPI) data. The government so far has been relying on the WPI data which economists say does not capture the inflation situation fully. They say that globally, central banks and policymakers rely on CPI data to measure inflation. CPI in rural areas stood at 7.38%, while in urban areas it was higher at 8.25%. The annual rate of inflation, as measured by WPI in January, eased to 6.55% from the previous month’s 7.47%. The CPI data captures price movements at the retail level and has wider basket of goods, while the WPI data measures movements at the wholesale level. The CPI data showed that prices of oils and fat, eggs, meat, fish, milk and milk products, fruits, condiments and prices, clothing and bedding, fuel and light and prepared meals continued to remain stubborn across the three segments — rural, urban and combined. The trends in both data are nearly similar. Vegetable prices across rural, urban and combined sectors showed significant declines due to improved supplies, mirroring the WPI data. The data showed vegetable prices declined an annual 30.15% in urban areas in January, while it was down 22.31% year-on-year in rural areas. The combined data showed vegetables prices fell an annual 24.87%. Economists said it was difficult to draw any conclusion from the CPI data. They said policymakers would have to rely on a variety of data for measuring price pressures and the CPI data series need to stabilize before making any definitive conclusion. Stubborn inflation has remained a policy challenge for the central bank and the finance ministry for a significant period. RBI has raised interest rates 13 times since March 2010 to tame price pressures but has indicated in its latest policy review that it may reduce interest rates if inflation declines to comfort levels. Some economists said the CPI data showed that inflation continues to remain firm.

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