India Inflation


India: Inflation accelerates amid higher food prices

January 14, 2011

In November, the consumer price index for industrial workers (CPI-IW) rose 0.55% over the previous month, halving the 1.12% increase tallied in October. Owing to the relatively subdued monthly price increase, annual consumer price inflation plummeted to 8.3%, down from 9.7% in October. However, the more recent and comprehensive wholesale price index (WPI) from December, India's headline inflation measure, showed that price pressures resurfaced in the wake of rising food prices. In December, the WPI added 1.26% over the previous month, which nearly tripled November's 0.42% price increase, but matched market expectations. As a result, annual wholesale inflation jumped to 8.4% (November: 7.5%). The monthly WPI increase was mostly fuelled by higher food prices (+3.7% month-on-month), in particular for fruits, vegetables, condiments and spices. The increase reversed the gradual moderation in food inflation seen in previous months, following on September's 1.3% spike. In fact, the sharp rise in food prices has forced the government to take extraordinary measures including the sale of subsidized agriculture products, a cabinet reshuffle, the raiding of traders to prevent hoarding of staples, and a ban on onion exports. Owing to the strong price increase, annual average wholesale price inflation jumped to 9.4%.


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