Fruits,veggies pull consumer price index to 6%

Experts remain cautious about new series.

Led by higher prices of food items,retail inflation on an all India basis grew by 6 per cent in January 2011 revealed a new consumer price index (CPI) that was launched on Friday.

The new index combines data from rural and urban areas and has a revamped basket of products that reflect actual consumption patterns. It is a part of the Centres efforts to get improved and timely data on price movements in order to make effective policy interventions.

According to the new series,CPI (national) stood at 106 for January 2011 taking the base at an annualised level of 100 for the calendar year 2010. The CPI for rural areas was 107 while for urban areas was 104.

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Retail inflation was led by a spurt in food prices,particularly fruits and vegetables and cereals (see chart). It hit the hardest in rural India where food has a near 60 per cent weight in the CPI.

The government has however warned that the numbers are provisional and will take about a year to stabilise. Since these indices are being introduced for the first time,annual inflation rates have not been compiled, the ministry of statistics and programme implementation said.

Analysts while welcoming the move seemed cautious in their response. The existing indices for agriculture labour and industrial workers have outlived their utility. The new series of CPI was a long overdue step which will reflect todays consumption patterns and commodity basket, said Sunil Sinha,head of economic research at rating agency Crisil. But the annualised level of 100 for the base year needs to be explained more,he said.

NR Bhanumurthy,an economist at the National Institute of Public Finance and Policy said,The indices are a very welcome measure with a very strong methodology. It will give effective inputs to both monetary and fiscal policymakers. Once it is more widely accessible by markets and researchers it would also replace the wholesale price index based inflation.

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While warning that the numbers may not be very robust at present,Bhanumurthy said,Inflation based on CPI (national) grew 6 per cent in January which is lower than the RBIs target of 7 per cent for headline inflation. Further,urban inflation is lower than rural inflation and there is no price rise in the housing component. All this leads to questions over the accuracy of the data that is collected.

Inflation,as measured by the Wholesale Price Index which remains the top benchmark — stood at 8.23 per cent in January.

As per the data released today,food,beverages and tobacco went up to 108 on a national basis in January,while fuel and light were at 106. Clothing,bedding and footwear in the month under review stood at 107 while housing remained constant at 100. The miscellaneous items went up by six points to 106.

Meanwhile,the state wise consumer price data revealed that retail inflation was highest in Kerala,Orissa and Meghalaya. In all three states,the index stood at 108 in January,indicating an 8 per cent growth in inflation.