Inflation May 2010 update

WPI index increased from 253.7 in April ’10 to 258.1 in May ‘10. This implied inflation for May ’10 at 10.16% (YoY), higher than market expectations of 9.43% (as per several polls).

 Inflation was higher as market participants expected a lower figure for the manufactured products sub-sector (explained below). For March ’10, inflation was revised upwards from 9.9% to 11.04%.  Once again inflation has been revised upwards significantly. 

WPI Monthly  Inflation at a Glance



Rate of Inflation (YoY in %)


April ’10

May ’1 0 April ’10

May ’10

Primary Articles


299.9 13.88


Of which        
Food Articles





Non-food articles





Fuel Products





Manufacturing Products





WPI Inflation





Source: Commerce ministry

 Sector-wise Analysis

 Primary articles: : The index for primary articles increased from 289.7 in Apr’10 to 299.9 in May ‘10. This implies primary articles inflation at 16.61% (y-o-y) in May’10. Primary Articles is further divided into two sub- groups: Food Articles and Non-food articles:

  •  Food: The index for Food Articles increased from 292.4 in Apr’10 to 294.6 in May’10 . This implies food articles inflation for May’10 at 16.5% (y-o-y).  The index increased due to higher prices of pulses like urad, moong and arhar. Prices of  meat items like fish, mutton, chicken, beef & buffalo meat also increased, Prices of other food items like tea, spices fruits & vegetables, also incraesed.  However, the prices of foodgrains like wheat , jowar, barley and maize declined alongwith prices of masur, ragi and coffee.
  • Non-food: The non-food articles index also increased  from 256.1 in Apr’10 to 283.1 in May’ 10. This implies non- food articles inflation for May’10 at 18.6%. The index for ‘Non-Food Articles’ increased due to higher prices of oilseeds like castor seed, sunflower  and groundnut seed. Prices of items like sugarcane, silk, timber, cotton, and jute also increased.  However, the prices of fodder , tobacco, rubber, etc  declined.

Fuel group: The index for Fuel Group Articles increased from 364.0 in Apr’10 to 368.2 in May’ 10. This implies fuel group inflation for May’10 at 13.04%. The fuel group index increased because of higher prices of lubricants, aviation turbine fuel and electricity . Prices of LPG, diesel and furnace oil also increased.  However, the prices of bitumen declined.

Manufactured Products: The index for manufactured products has increased from 216.6 in April ’10 to 219.1 in May’10. This implies manufactured products inflation for May’10 at 6.41%.

Prices of manufactured food products declined in May’10. The food products index declined from 249.1 in Apr’10 to 246.1 in May’10.  The index declined on acopount of lower prices of sugar, mustard oil, sooji etc. However, prices of atta, maida, groundnut oil and biscuits increased. 

The manufactured products index rose sharply because of a rise in prices of non-food manufactured items. Prices of textiles, paper, plastics, chemicals and metals also rose. Out of the 11  non-food manufactured sub-sectors, price rise was seen in nine sub-sector

Core Inflation
RBI has been focusing on this measure of inflation for its monetary policy actions. In core inflation, we exclude food items from Manufactured Products sub-sector.

Core inflation index has risen from 109.4 in Apr’10 to 111.3 in May’10. This implies core inflation for May’10 at 6.58% higher than 6.05% for Apr’10. Again core inflation has gone up. In manufactured products analysis, we saw that except for food products, prices in all other sub-sectors had increased. This has resulted in core inflation moving higher in May’10.

Summing Up

Inflation numbers continue to show high price pressures in the economy. In its April 2010 Monetary Policy, RBI had given inflation projections for March-end 2011 at 5.5%.   Though March-end 2011 is still some months away, the current trajectory of inflation indicates final numbers could be higher. Core inflation analysis shows inflation has become broader based with continued rise in price of non-food manufactured products. Above all, revised numbers are much higher than provisional figures.

 Therefore both inflation and IIP are likely to put pressure on RBI. However with increased global risks, RBI’s monetary policy outlook continues to remain highly uncertain.

4 Responses to “Inflation May 2010 update”

  1. San Bernardino Ca Auto Dealership Report | Bank Auto Loans Says:

    […] Inflation May 2010 update « Mostly Economics […]

  2. Praveen Says:

    Amol, based on the WPI would you expect RBI to increase the rates before the due date of quarterly review i.e July?

  3. The Gold Standard » India’s inflation rate Says:

    […] interest rate adjustment by Reserve Bank of India. You can refer to this very informative post for details. A good friend of mine who is a data and analysis wonk (I mean it in a very positive […]

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