In the great wool pulling exercise that is Indian economic data, we first announce a “preliminary” number for inflation and later, revise this number after more real data comes in. Primary Articles Inflation, which is the stuff that we would consider as “core base raw materials” like food, tobacco, rubber and so on, is announced every week and forms about 20% of the whole inflation index. (15% is fuels and the remaining is “manufactured goods”, which is announced only once a month)
Every Thursday, they do a first-announcement for inflation for the week ended 14 days back. And then, they revise the data for that week, two months later. The revisions are meant to be minor but this time we have the mother of all revisions:
Primary articles inflation is important in that inflation flows from the primary items to the secondary or manufactured goods with a time lag. That is, if potato prices go up today, and keep going up, prices for that aloo bonda or french fries will go up in a few months. So it’s not really as important to note the level of primary articles inflation as to note the trend in it, and to see whether it’s transient or stubborn.
It’s going back up.
And consider that it could all be a lot higher than the current data – with an upward 4% revision, we might as well be at 14-15% today and not know it!
Finally, look how long primary articles inflation has been about 10% – it will definitely pummel the secondary level items, which have been inching up as well.
Hunker up – we’ll see a lot more pain.