The entire series of dairy products in the WPI has a combined weightage of 0.68%. Though with a small weightage, rise in prices of dairy products may not have much bearing on the rising inflation rate measured by WPI, it appears that government is taking no chances when it comes to tackling price rise.

Milk prices have already been raised by Re one per litre last month. “Prices of milk and Skimmed Milk Powder (SMP) have hardened. We wanted to import SMP but due to hardening of the international prices there has been no import of SMP,” Union finance minister P Chidambaram said after coming out of the meeting of the Cabinet committee on economic affairs (CCEA) on Thursday.

India is the world's largest producer of milk and in the current year there has been a surplus production.

“Hardening of milk prices is due to the cascading effect of price rise in other essential commodities. The rise in cattle feed prices is also a contributing factor. In a scenario of rising price trend, milk is the last and the ultimate commodity in which the price rise takes place. Therefore, milk can be a real indicator of actual price rise,” said a trader.

Source: The Financial Express