Consumer Price Index Inflation climbs to high in four months.

Annual retail Consumer Price Index (CPI) inflation accelerated to a four-month high in May this year.  This was mainly due to the hike in fuel prices and subsequent increase in food prices, that lifted the CPI-based reading to 4.87%, official data released on Tuesday showed. India’s annual retail inflation accelerated in April to 4.58%. Core inflation, mainly reflecting firming up of manufacturing prices touched 5.9 percent, at a 44-month high, economists estimated.

The food and beverages segment saw inflation accelerating to 3.37% in May, from 3% in April, while inflation in the fuel and light segment at 5.8%, compared to 5.16% in the previous month. The overall miscellaneous segment in the CPI saw inflation climbing up to 5.35% in May, from 4.96% in April.

Annual retail food inflation, which contributes about half of the weight in the CPI index, rose 2.80 percent in April almost at the same level of 2.81 percent rise in the previous months. Inflation in the pan, tobacco and intoxicants category quickened marginally to 8% in May, from 7.91% in April. The clothing and footwear segment saw inflation accelerating to 5.47%, from 5.11% in the preceding month. Housing was the sole category where inflation reflected a deceleration, albeit marginally, from April’s 8.5% pace to 8.4% in May.

India, the third-largest economy in Asia faces the rising crude oil prices, touching $78 a barrel last week,  highest since November 2014 following prospects of new U.S. sanctions on Iran. India wants 80 percent of its oil needs through imports. An increase in the oil price by $10 a barrel could quicken inflation by 1 percentage point and reduce economic growth by 0.2 to 0.3 percentages.

The IMF- International Monetary Fund, however, expects Indian economic growth could rebound to 7.4 percent in fiscal year 2018/19 beginning April, from an estimated 6.6 percent in the previous fiscal year.

 Consumer Price Index

The Consumer Price Index is a statistical estimate constructed using the prices of a sample of representative items whose prices are collected periodically. It measures changes in the price level of the market basket of consumer goods and services purchased by households. Sub-indices and sub-sub-indices are computed for different categories and sub-categories of goods and services, being combined to produce the overall index with weights reflecting their shares in the total of the consumer expenditures covered by the index. It is one of several price indices calculated by most national statistical agencies.

The annual percentage change in a CPI is used as a measure of inflation. A CPI can be used to index (i.e. adjust for the effect of inflation) the real value of wages, salaries, pensions, for regulating prices and for deflating monetary magnitudes to show changes in real values. In most countries, the CPI, along with the population census, is one of the closely watched national economic statistics

 

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