The Ruling Congress Government doesn’t seem to get the Inflation Fixed despite a slap on the face in the recent State Elections of Uttar Pradesh.
Annual Inflation for March came at 6.89% compared with 6.95% for the previous month and was higher than consensus of 6.65%. The rise in WPI in March is mainly a result of rise in primary articles prices. On the positive side, manufactured product inflation fell sharply to 4.87% from 5.75%.
Contribution to inflation from primary articles rose sharply to 35.4% from 23.2% while contribution of manufacturing products fell to 41.6% from 48.6%. This is due to sharp rise in food and mineral prices. The YoY growth in manufactured articles fell sharply to 4.87% compared with 5.75% the previous month. Fuel grew by 10.41% compared with 12.83% in the previous month. Primary article prices rose to 9.6% vs. 2.25% in February.
Inflation has fallen marginally in March compared with Feb but the sharp rise in primary articles (esp. food and minerals) has taken the overall inflation above consensus estimates. The fall in manufactured inflation is heartening. The relative high base will keep inflation low next month before it starts wearing of.
Finally, High food prices, below average monsoon and potential pass through of oil price remains a potential threat to inflation