3/3/2014 Inflation mostly driven by primary articles: Report - The Economic Times

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Primary articles led by food items have the highest share in

overall price index at a whopping 35.7 per cent and are mainly

responsible for high inflation.

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Inflation mostly driven by primaryarticles: Report

READ MORE ON » WPI inflation | WPI | RBI | Raghuram Rajan | inflation basket | CPI inflation | Care Ratings

MUMBAI: Primary articles led by food items

have the highest share in overall price index

at a whopping 35.7 per cent and are mainly

responsible for high inflation, Care Ratings

has said in a report.

The manufactured items basket, though

having the highest weight, contributes the

least to the overall inflation index, it said.

This is despite the fact that primary articles

have only 20.1 per cent weight in the overall

inflation basket, but contributed to a 35.7 per cent to spike in the overall price index, followed

by fuel and power basket, which has the lowest weight (14.9 percent), contributing to 33.4

per cent to the overall inflation, the report said.

Against this, the manufactured products basket, which has the largest weight of 65 per cent

in the inflation basket, has contributed the least to the price spiral at 30.9 per cent, it said.

The data, based on the WPI and CPI numbers for January 2014, is the latest inflation

reading, Care said in the report authored by its economists Madan Sabnavis and Anuja

Jaripatke.

Among primary articles, food items, which though have only 14.3 per cent weight, contributed

31 per cent to the overall price index, while food grains with just 4.1 per cent weight ramped

the index by 6.5 per cent. Cereals with 3.4 per cent weight have 7.6 per cent share in index,

and pulses, carrying 0.7 per cent weight, have -1.2 per cent share.

This means that though food articles have 35.7 per cent share in primary articles basket,

their contribution to the total is 31.5 per cent, with four products groups-cereals, vegetables,

eggs meat and fish & milk products accounting for 27.5 per cent of inflation.

Food grain inflation is mostly driven by cereals which include rice (5.7 pct) and wheat (1.9

pct). Higher MSPs could be one contributing factor here as output has been robust,

something RBI Governor Raghuram Rajan also blamed last week.

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3/3/2014 Inflation mostly driven by primary articles: Report - The Economic Times

http://economictimes.indiatimes.com/news/economy/indicators/inflation-mostly-driven-by-primary-articles-report/articleshow/31279112.cms 2/5

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Against this non-food articles contributed just 4.5 per cent, most of which comes from fibres

(4 pct). Fuel & power group chipped in 33.4 per cent of overall inflation with a weight of just

about 15 per cent, most of which came from mineral oils, with a share of 25.3 per cent.

Share of power stood at 13 per cent, most of which came from industrial (5 pct) and farm

power (4.2 pct).

Against this, manufactured products group, with a share of 30.9 per cent, contributed

proportionately the least to overall inflation with most of the inflation being contributed by

textiles with a share of 7.4 per cent.

Within textiles, cotton textiles contributed 3.5 per cent, followed by chemicals with a share of

6.1 per cent, machinery and machine tools at 3.3 per cent.

Food products contributed 2.9 per cent to the overall inflation, which mostly came from

canning, preserving & processing with a share of 1.3 per cent.

Despite repeated fare hikes, transport, equipment and parts contributed just 2.9 per cent to

the overall price index.

When it comes to CPI basket, food, beverages and tobacco contributed a whopping 56.4

per cent to the index, with major culprits being cereals and products (18.4 pct), egg, fish and

meat (5.5 pct) and condiments and spices (5.1 pct).

Unlike WPI inflation, share of vegetables in CPI inflation is lower at 4.6 per cent.

Miscellaneous items like education, medical care, recreation and amusement, transport and

communication and household requisites contributed 20.4 per cent to retail inflation. Housing

contributed 11.2 per cent to overall CPI inflation.

Other contributions are: vegetables (1.7 pct weight and 6.4 pct share), fruits (2.1 pct weight

and 2.5 pct share), milk (3.2 pct weight and 5.7 pct share), eggs, meat and fish (2.4 pct

weight against 7.8 pct share), condiments and spices (0.6 pct weight, but 3.2 pct share) and

other food items (0.2 pct weight against -0.4 pct share).

Notably, inflation for most part of FY12 and FY13 remained at higher level, with headline WPI

inflation averaging at 7.4 per cent in FY13, though of late core inflation moderated

considerably.

Amongst non-food articles which has weight of 4.3 per cent and a share of 4.5 per cent in the

price index, fibres with 0.9 per cent weight contributed to 4 per cent share, oilseeds (1.8 pct

weight, but -0.9 pct share) were the major reasons for the uptick.

Other non-food articles like crude petroleum is a major component with 0.9 per cent weight

but contributing 3.7 per cent to the overall index.

3/3/2014 Inflation mostly driven by primary articles: Report - The Economic Times

http://economictimes.indiatimes.com/news/economy/indicators/inflation-mostly-driven-by-primary-articles-report/articleshow/31279112.cms 3/5

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NEWEST OLDEST MOST DISCUSSED DISAGREE

RBI should differentiate Structural or Policy driven Inflation (a Good cholesterol) from that

of Market driven inflation (Bubbles or Bad Cholesterol). Interest rates can not curb Policy

inflation it can only curb market inflation. (That Pressure-Volume-Temperature Law or

relationship only works for Pneumatic or Compressible system and not hydraulic

circuits)

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