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Inflation up again at 7.55%

Led by rising prices of vegetables and petrol, inflation moved up to 7.55 per cent in May, making it tougher for the Reserve Bank of India to cut interest rates in its policy next week to boost sagging growth. Inflation, as measured by the Wholesale Price Index, was 7.23 per cent in April.

In May last year, however, it was 9.56 per cent. Overall food inflation rose to 10.74 per cent in May, from 10.49 per cent in the previous month. Food articles have 14.3 per cent share in the WPI basket.

The headline inflation number for March was revised upwards to 7.69 per cent, from the provisional estimate of 6.89 per cent.


INFLATION CONTINUES TO BITE


Led by rising prices of vegetables and petrol, inflation moved up to 7.55 per cent in May making it tougher for the Reserve Bank to cut interest rates in its policy next week to boost sagging growth.

Experts said that the rise in inflation, which is mainly on account of food inflation, may not dissuade the RBI to go in for at least a 0.25 percentage points cut in short-term interest rate in its monetary policy review on 18 June.

Inflation, as measured by the Wholesale Price Index [WPI], was 7.23 per cent in April. In May last year, however, it was 9.56 per cent.

Overall food inflation rose to 10.74 per cent in May, from 10.49 per cent in the previous month. Food articles have 14.3 per cent share in the WPI basket.

The headline inflation number for March was revised upwards to 7.69 per cent, from the provisional estimate of 6.89 per cent.

During May, manufactured inflation showed some easing and was at 5.02 per cent. It was 5.12 per cent in April. In the ‘fuel and power’ segment inflation rose by 11.53 per cent on an annual basis. The rate of price rise was 11.03 per cent in the previous month.

‘Notwithstanding the elevated inflationary expectations, concerns related to the moderation in economic growth may prompt the RBI to reduce the Repo Rate by 25 basis points in its policy,’ ICRA Economist Aditi Nayar said.

As per the official data released, potatoes turned costlier by 68.10 per cent in May on an annual basis. For April, the rate of price rise was 53.44 per cent. Besides, pulses and wheat turned expensive by 16.61 per cent and 6.81 per cent, respectively.

Besides, vegetables inflation was at 49.43 per cent in May. In April, the rate of price rise was 61 per cent.

Also, eggs, meat and fish prices rose 17.89 per cent during the month, slightly higher than 17.54 per cent in April. Inflation in milk was 11.90 per cent, while rice and cereals turned costlier by 5.07 per cent and 5.73 per cent, respectively.

Onion prices declined [-] 7.23 per cent in May. The rate of decline was [-] 12.11 per cent in April.

‘There is pressure on food articles. RBI might try to protect growth. But they do not have much leeway for that,’ Crisil chief economist DK Joshi said.

To contain the inflationary pressure, government is now pinning hopes on monsoon. Rains are crucial for agriculture.
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