Thanks to the lower growth in the index for manufacturing prices, the impact of the fortnightly revision in the prices of petrol and diesel has so far been moderate on the wholesale price index in the post-administered price mechanism era.
While the wholesale price index-based inflation has risen by only 2.4 per cent between May and September this year, fuel prices have risen by almost 13 per cent. This was in stark contrast to the trend in 2000-01 when the fuel prices had impacted inflation the most because the manufacturing sector was also on an upswing.
The first change in oil prices was introduced on June 3, when petrol prices were raised by around Rs 2.50 a litre and diesel prices were hiked in the range of Rs 1.50 per litre. As an immediate fallout, inflation rose from 1.5 per cent in the week ending June 1 to 2.05 per cent in the week ending June 15.
After the first price change, the indices for petrol and for high-speed diesel went up. The latter has a weight of 2.02 in the wholesale price index.
However, the next hike on July 15 did not have a substantial impact on the indices for petrol or high-speed diesel. As a result, the inflation level went up marginally from 2.48 per cent in the week ending July 13 to 2.85 per cent in the week ending July 27.
While there were no changes in oil prices on August 1, the indices for petrol and high-speed diesel fell. The price cut effected on August 15, however, did not alter the indices.
The hike on September 1 was reflected in a rise in the indices for both the items by the week ending September 15. While the delayed effect has not yet set in, the wholesale price index has risen due to the impact of the rise in the prices of vegetables and manufactured food products. So the impact of the hike announced on Monday may just push up the inflation rate more sharply in future.
