Food Inflation - Jan 2011 - Jun 2012

It is not surprising to see that inflation in food prices is the highest among all items in the Wholesale Price Index data.

Here are some graphs drawn with data from the Wholesale Price Index for articles that are food related.  The WPI index is released every month and I will try to update the graphs on a monthly basis.

Each item is indexed at 100 with the base year as 2004-05.

The following graph contains all items that goes to make a coffee or tea.

Wholesale Prices - Dairy & Associated
items that is used for Coffee/Tea

Oil is an essential item on our diet.  India imports quite a huge amount of edible oil due to supply not matching demand.  The following includes most items excluding coconut oil which is not used in a big way for food.

Wholesale Prices - Edible Oils

This item is the most volatile of all items.  Some of the vegetables are seasonal as well and hence some of the data is not available.

Wholesale Price Index - Vegetables

Foodgrains are an essential item and with the monsoon failing this is going to be the item with the most inflation in the coming months.  Watch out for the price rise.

Wholesale Price Index - Foodgrains

 All the above graphs represent the wholesale prices which is more tied to the demand (thus a possibility of prices artificially inflated as well) as well as the production cost and production (supply).

The retail prices aren't aggregated as much as the wholesale price data.

Consumer Price Index Jun 2012

The CPI (Consumer Price Index) numbers for June 2012...

Type	May 2012	Jun 2012
Consolidated	10.36	10.02
Urban	11.52	10.44
Rural	9.57	9.74

Highlights (in brief):

• Vegetables costlier by 27.60 percent
• Edible oils by 16.58 percent
• Milk products by 12.75 percent
• Fruits by 6.92 percent

Here is the breakdown of CPI Data for Tamilnadu (The base is 100 in the year 2010)

Tamilnadu	Attribute	Urban	Rural	Combined
	Food, beverages and tobacco	120.7	120.9	120.8
	Fuel and light	130.3	132.4	131.4
	Clothing, bedding and footwear	124.1	125.4	124.8
	Housing	NA	122.0	NA
	Miscellaneous	120.3	117.0	118.6
	General Index	121.6	121.2	121.4

It is interesting to compare the above with Puducherry's numbers given below.

Puducherry	Attribute	Urban	Rural	Combined
	Food, beverages and tobacco	120.8	120.9	120.9
	Fuel and light	120.9	117.4	118.6
	Clothing, bedding and footwear	132.7	126.7	128.5
	Housing	NA	117.9	NA
	Miscellaneous	116.1	115.5	115.7
	General Index	120.0	118.8	119.1

If you are interested in numbers for other states, you can find it here.  The constituents of each attribute can be found in this document..

You can find the analysis of the CPI numbers on  Firstpost, Financial Express and many other newspapers.  Based on the numbers of CPI and WPI, it is not expected that the RBI to cut policy rates on the 31st of this month.  Hence your rates on loans is unlikely to come down anytime soon.

Background on CPI - The CPI index was only published starting January of 2012 and hence does not have much history associated with it.  There is a good analysis that you may be interested in.  

The RBI relies more on the WPI (Wholesale Price Index) number for its policy decisions (which includes the interest rates, CRR) currently.  The RBI's current perspective about inflation indices is echoed from the governor's recent speech: 

In its present structure, the WPI does not capture the price movement of services. Also, it is a hybrid of consumer and producer price quotes. For example, the index captures the price of important commodities like milk from the retail markets; not at the producer level. In contrast to CPI, PPI measures price changes from the perspective of the seller. Sellers’ and purchasers’ prices differ due to government subsidies, sales and excise taxes, and distribution costs. For these reasons, it is, therefore, desirable that we move towards developing a Producer Price Index (PPI) that measures the average change over time in the sale prices of domestic goods and services. 

Hoping that the central bank has the data in future to come up with the right policy rates.