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MSP hike on Kharif crops did not alone move the needle on inflation, so what underlies the rise in prices?

The spike in food inflation in July is not necessarily because of the 5.30-10.35% hike in the minimum support price (MSP) of Kharif crops. In fact, the 13 food crops for which MSP was announced on June 7 this year have a combined weight of just 2.748 in the Wholesale Price Index (WPI), and even among them, four show a lower WPI-based inflation in July compared with last July.

Cereals are part of a larger ‘Food Articles’ category which has a weight of 15.255 in the WPI.

The data shows that the rate of inflation for this category stood at 14.25% in July, higher than 10.77% in July last year.

In the MSP hikes that came in June, the maximum 10.35% was for moong, followed by sesamum (10.28%), cotton-long staple (10.03%), groundnut (9.0%), cotton-medium staple (8.88%), jowar-maldandi (7.86%), ragi (7.49%), jowar-hybrid (7.07%), paddy -common (7.01%), soybean-yellow (6.98%), paddy-grade A (6.94%), maize (6.52%), bajra (6.38%), niger seed (6.13%), tur/ arhar (6.06%), sunflower seed (5.63%) and urad (5.3%).

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Four crops — bajra (9.09%), maize (-0.05%), sunflower (-21.56%) and soyabean (-15.95%) — recorded a lower inflation in July compared with the corresponding month last year, shows an analysis of the WPI based inflation data.

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Higher WPI inflation was recorded for paddy (9.03%), jowar (34.19%), ragi (11.85%), arhar (32.28%), moong (13.72%), urad (10.37%), groundnut (18.55%), sesamum (27.34%), and niger seed (16.95%).

As far as the retail inflation based on the Consumer Price Index (CPI) is concerned, it was lower for bajra and its products (5.68% in July this year compared with 23.11% in July last), and maize and its products (9.64% in July this year against 15.22% in July last). For other items like rice, jowar, and arhar (tur), retail inflation was in double digits for several months before the MSP announcement in June.

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Overall, the Consumer Food Price Index, which has a weight of 39.06 in the CPI, recorded 11.51% inflation in July this year against 6.69% last year. The sharp hike in the food inflation in July this year was largely attributed to a high inflation of vegetables (37.34%).

© The Indian Express (P) Ltd

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