Inflationary pressure, driven by prices of food articles, will keep the pressure on the government to remove supply side bottlenecks

New Delhi: Inflation moved up to 7.55% in May because of spurt in prices of potato, pulses and wheat, although onion and fruits showed a declining trend, reports PTI.

Inflation, as measured by the Wholesale Price Index (WPI), was 7.23% in April. In May last year, however, it was 9.56%.

Overall food inflation rose to 10.7% in May, from 10.5% in the previous month. Food articles have 14.3% share in the WPI basket.

Potatoes turned costlier by 68.1% during May on annual basis. For April, the rate of price rise was 53.4%. Besides, pulses and wheat turned expensive by 16.6% and 6.8% respectively.

However, vegetables inflation was lower at 49.4% in May. In April, the rate of price rise was 61%.

Besides, eggs, meat and fish prices rose 17.89% during the month, slightly higher than 17.54% in April, the official data released today showed.

Inflation in milk was 11.9%, while rice and cereals turned costlier by 5.1% and 5.7% respectively.

Onion prices declined (-)7.23% in May. The rate of decline was (-)12.11% in April.

Non-food manufactured inflation showed some easing and was 5.0% in May. It was 5.1% in April.

The headline inflation number for March was revised upwards to 7.7%, from the provisional estimate of 6.9%.

Inflation in overall primary articles crossed the double digit mark to 10.9% in May, from 9.7% in April.

Also, inflation in non-food primary articles, which include fibres and oilseeds, increased sharply by 8.5% in May. In April, it was 1.6%.

In the 'fuel and power' segment inflation rose by 11.5% on an annual basis. The rate of price rise was 11.0% in the previous month.

As per the official data, oil seed prices shot up by 19.2% in May. The rate of price rise was 16.7% in April.

On year-on-year basis, among manufactured items, iron grew dearer by 14.9%, while edible oil prices rose by 10.5%. Inflation in tobacco products and basic metals was 7.8% and 10.3% respectively.

Experts said the inflationary pressure, driven by prices of food articles, will keep the pressure on the government to remove supply side bottlenecks.

Overall inflation hovered at double digit for most of 2010 and 2011. The Reserve Bank hiked key policy rates 13 times, totalling 350 basis points, between March 2010 and October 2011 to tame inflation.

Since January, RBI has resorted to injecting liquidity into the financial system, by reducing Cash Reserve Ratio for banks. Besides, it has called for fiscal steps by the government to combat inflation.

However, in its annual monetary policy last month, RBI cut key lending rate by 50 basis points to lower borrowing costs amid falling industrial and economic growth.

RBI has projected inflation to be around 6.5% by March 2013, with a caution that it will remain sticky and there is need to arrest the decline in economic growth.