Inflation mostly driven by primary articles: Report

Primary articles led by food items have the highest share in overall price index at a whopping 35.7% and are mainly responsible for high inflation, Care Ratings has said in a report.

The manufactured items basket, though having the highest weight, contributes the least to the overall inflation index, it said.

This is despite the fact that primary articles have only 20.1% weight in the overall inflation basket, but contributed to a 35.7% to spike in the overall price index, followed by fuel and power basket, which has the lowest weight (14.9 percent), contributing to 33.4% to the overall inflation, the report said.

Against this, the manufactured products basket, which has the largest weight of 65% in the inflation basket, has contributed the least to the price spiral at 30.9%, it said.

The data, based on the WPI and CPI numbers for January 2014, is the latest inflation reading, Care said in the report authored by its economists Madan Sabnavis and Anuja Jaripatke.

Among primary articles, food items, which though have only 14.3% weight, contributed 31% to the overall price index, while food grains with just 4.1% weight ramped the index by 6.5%. Cereals with 3.4% weight have 7.6% share in index, and pulses, carrying 0.7% weight, have -1.2% share.

This means that though food articles have 35.7% share in primary articles basket, their contribution to the total is 31.5%, with four products groups-cereals, vegetables, eggs meat and fish & milk products accounting for 27.5% of inflation.

Food grain inflation is mostly driven by cereals which include rice (5.7 pct) and wheat (1.9 pct). Higher MSPs could be one contributing factor here as output has been robust, something RBI Governor Raghuram Rajan also blamed last week.

Against this non-food articles contributed just 4.5%, most of which comes from fibres (4 pct). Fuel & power group chipped in 33.4% of overall inflation with a weight of just about 15%, most of which came from mineral oils, with a share of 25.3%.

Share of power stood at 13%, most of which came from industrial (5 pct) and farm power (4.2 pct).

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