An increase in petrol prices last month pushed up fuel and power inflation to a four-week high of 12.54 per cent for the week ended May 21, even as the rate of price rise in food items declined marginally to 8.06 per cent.
Petrol prices were raised by Rs 5 a litre by oil marketing companies from May 15, which jacked up the inflation rate in this fuel to 32.41 per cent from 21.81 per cent in the previous week. Fuel and power inflation stood at 12.11 per cent in the previous week and 14.24 per cent a year ago.
This inflation rate rose despite major segments like liquefied petroleum gas (LPG) and high-speed diesel prices showing the same rates of inflation at 11.31 per cent and 5.49 per cent, respectively, as were there for the previous week.
Petrol has a 1.09 per cent weight in the overall wholesale price index, which may not increase inflation much as a first round impact. In fact, Siddharth Shankar, economist with financial services firm KASSA, said, “We still have to see the impact of fuel price hike (on primary articles).”
However, if diesel and LPG prices are also raised, then the impact would be crucial, particularly when second round of impact comes.
A meeting of an Empowered Group of Ministers will hold a meeting on June 9 to decide on a price rise of diesel among other remaining fuels.
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In April, overall wholesale price inflation stood at 8.66 per cent, down from 9.04 per cent in March. The May figures will come on June 14.
Food inflation, on the other hand, declined to 8.06 per cent for the week under consideration, from 8.55 per cent a week ago.
Even though the rate of price rise in fruits fell, it is still at elevated level of 30.5 per cent.
“If the declining trend in food items and non-food primary articles continues, perhaps it will be possible to have a moderate rate of inflation,” Finance Minister Pranab Mukherjee said today.
Among non-food articles, among primary items (non-processed articles), fibres inflation came down to 55.82 per cent from 60.43 per cent. Few weeks back it was over 85 per cent.
According to Yes Bank research, the Rs 5 hike in petrol prices will add close to 14 basis points to May inflation. A Rs 3 hike in diesel will add to 40-45 basis points (weight being 4.67 per cent in WPI) and Rs 30 hike in LPG a cylinder will add close to 10 basis points (weight being 0.91 per cent).