Consumers in urban areas paying more than what the data shows

NEW DELHI: For the consumer, the high inflation could be much more painful than what is indicated by the wholesale price index which has hit the 11.05% mark.

The latest consumer price index(CPI) for urban non-manual employees (UNME), which largely captures price rise for white-collared urbanites, pegs a figure of 7% for the month of April.

However, the subsequent rise in price of food products, in particular cereals, besides a sharp jump in fuel prices in June is expected to take the consumer inflation to a level last seen about a decade ago.

ET extrapolated the index numbers for urbanites based on the price rise for certain key items in the open market as the data for consumer inflation comes out with a lag.

Even after assuming the costs of housing, clothing and other miscellaneous items remained at the same level between April and June, the overall consumer inflation could be in the range of 12-13% when the data for June is available.

This is largely due to sharp rise in food products, which is the single largest component in the CPI, as also the fact that fuel prices have seen the sharpest annual rise in any given year. What it means is that the salary hike, which has been averaging 15% for the common man in urban India over the last few years, could be getting neutralised due to price rise.

We used the latest available data for CPI-UNME. The government data which has updated the CPI index has pegged a consumer price inflation of 7% in April 2008 over the same month last year. This was led by about 10% increase in the prices of food, beverage and tobacco as a category, which incidentally has close to half of the total weightage in the index.

However, the actual rise in prices of food products has been very sharp over the last two months in categories like rice, oil and milk products, besides swings in prices of fruits and vegetables. This in itself is expected to push the overall consumer inflation data to around 10-11% in June.

Besides, fuel costs for the consumer has risen by 10-15% over last year with two rounds of price hike of petrol and diesel. However, the modest weightage given to fuel and lighting category is expected to keep its contribution to overall inflation at check.

But this would be filter into the inflation through price rise in other categories such as transportation costs which comes under miscellaneous items. The miscellaneous category accounts for the second largest weightage of 24% in CPI-UNME.