DATA DISCREPANCY Part of the sharp rise in cereal inflation last month, say economists, was due to data discrepancies. Cereals, with a weight of 9.7% in the overall inflation index, consist of 20 sub-components. The discrepancy, economists say, may boil down to the different weights assigned to the price of grains distributed via the subsidised public distribution system (PDS) system and those sold outside it. "The smaller rise suggested by sub-components appears to be due to a steep 21.6% month-on-month drop in the price of 'rice by public distribution system', and a 4.9% fall in 'wheat by PDS," Nomura economists Sonal Varma and Aurodeep Nandi said in a note. "These falls could be due to the ending of the government's free foodgrain scheme last December," they added. The broader cereals index does not capture this, economists argue. "If the bottom-up estimates are right, then headline inflation is over-estimated by 0.23 percentage points, on our estimates, relative to the reported 6.52%," Varma and Nandi said. "If the top-down numbers are right, then the bottom-up numbers need to be revised higher." STILL WORRYING Even so, inflation in the food category remains worrying.
"Other food items are also showing a pick-up in prices such as proteins (meat, fish, eggs and milk) and pulses, while vegetable prices continue to decline," said Gaura Sen Gupta, an economist at IDFC First Bank Economics Research.
By weightage in the inflation index, 62% of the food and beverages basket is seeing inflation higher than 6%, Sen Gupta pointed out. ANZ's Nim said the persistently high wheat and rice prices – despite the government's steps such as curbing wheat export – has led to inflation in items which use these as key inputs. "The three-month moving average inflation rates for items like biscuits, bread, refined flour, and semolina have been substantially higher than their latest 3-year average inflation rates," said Nim.
"Cereal inflation, in short, has become broad-based, which is concerning." <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ India inflation in cereals category soars India seeing elevated inflation in a number of food categories ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Ira Dugal; editing by Eileen Soreng)
