Aam aadmi | inflation gallops to double digits

Aam aadmi inflation gallops to double digits
The Economic Times, June 23, 2009, Page 1

CPI AT 10.2% IN MAY

Anto Antony & Vivek Sinha NEW DELHI

PRICE rise experienced by ordinary consumers—Consumer Price Index (CPI)—rose to 10.2% in May, the same month the wholesale price inflation had remained less than half a percentage point.

Even as the WPI-based inflation famously turned negative for the first time in 35 years in the first week of June, the sudden surge in inflation based on rural and agricultural workers’ CPI, after a steady decline for four months, is likely to crimp any enthusiasm in policymaking circles for a sharp monetary or fiscal expansion, according to economists.

Retail inflation is measured by three different sets of CPI—one each for rural and agricultural labourers as well as industrial workers.

The labour bureau under the labour and employment ministry, which compiles these three consumer price indices, will release the index for industrial workers, the one used for computing dearness allowance, on June 30. Inflation as per this index is also expected to move up.

The difference between WPI and CPI is on account of the different items taken into account and the weights assigned to them. While food items have a weightage of 15.2% in WPI, their weightage in all the three consumer price indices is above 50%. The politically sensitive food price inflation is hovering at around 9% even now.

Economists say with retail inflation refusing to budge below the 10-year high of 10.5% it touched in January, even when WPI dropped to negative terrain, chances are that RBI will reverse the expansionary monetary policy while even the Centre might curb its spending plans.

A review of the situation by the finance ministry earlier had pointed out that the increase in rural income on account of higher government spending could be a reason for the higher inflation in rural areas.