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CPI INFLATION REMAINS ON THE UPSIDE

Nov 15th, 2017 at 05:58PM

  • CPI inflation came in at 3.58% in Oct’17, slightly higher than the Sep’17 number and highest in the past 7 months. Compared to Sep’17, the increase in food, fuel and housing prices contributed to the increase in overall inflation. Within food inflation, the price of vegetables, milk and milk products contributed to the increase.
  • Firming up of crude prices has led to increase in fuel inflation to 6.36% in Oct’17 from 5.56% in Sep’17.However, cut in excise duty announced by the Government tempered the price increase in fuel.
  • Meanwhile, Core CPI decreased to 4.55% in Oct’17 compared to 4.61% in Sep’17. The overall CPI inflation has remained below the core inflation since Sep’16.

INFLATION IN INDIA: RURAL VS URBAN

  • Since Jan’12, consumer price inflation in rural areas has outpaced consumer price inflation in urban areas in most of the months (except 12 months out of 80-months). During the period, the average rural inflation was higher by 85 bps than urban inflation. This difference in rural and urban inflation may be due to: different weight age in commodity baskets and change in individual commodity prices.
  • By looking at the data more deeply, we found that among the sub six segments, food and beverage prices in rural and urban areas tracked each other closely, while “pan, tobacco and intoxicants” actually seemed more expensive in urban areas (except recent months). Interestingly, inflation in clothing and footwear has dropped rapidly over the years in both rural and urban areas, with the drop in urban areas being much steeper. However, fuel and light inflation in rural areas is always higher than urban areas but in recent months in urban areas it has increased significantly. The rise in fuel inflation in urban areas may be due to the LPG price hike in non-subsidized cylinders, which is mainly used in urban areas.The recent convergence between CPI rural and urban inflation may be due to rise in fuel inflation in urban areas.

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