Underlining the uncomfortable situation on the price front, the wholesale price index (WPI) rose to a near three and a half year high of 7.41% for the week ended March 29, 2008. Inflation had last stood above this level, at 7.68%, in the week ended November 12, 2004.
The latest spike is on account of a continued price upsurge increase in primary articles like vegetables, fruit and pulses, as well as a sharp increase in manufactured products like foundries, iron, steel, as well as basic metals. Delayed revisions to prices of some items in the WPI basket have also contributed to the spike seen this March (the index rose 2.3 percentage points within the month).
With today’s release of WPI inflation numbers for the last week of fiscal 2007-08, average annual inflation for the year stands at 4.44%, below the Reserve Bank of India’s tolerance level of 5% for the year. The WPI estimate for the week ended February 2 was also revised upwards to 4.74%, a sizeable revision from the earlier estimate of 4.07%.
“The manufactured products sub-index increased 0.9% week-on-week owing to an outsized jump of 3.8% in the prices of base metals, alloys and metal products, and a 0.8% increase in manufactured food items. The primary articles sub-index rose 0.2% week-on-week to be up 8.9% over year ago,” said Rajeev Malik, senior economist, JP Morgan.
The price spike comes even as industrial production growth picked up in February, prompting Malik to say he expects a 50 basis points hike in the cash reserve ratio in the on or before the April 29 monetary policy review.
Dharmakirti Joshi, principal economist, Crisil, said the price situation remained “very uncomfortable” on the food and vegetables front. “The data is surprising and beyond my imagination. People will have to wait for interest rates to ease and the RBI may actually tighten rates,” he said, adding that inflation would moderate in coming weeks as the impact of recent fiscal measures taken to cool prices of items like edible oil get reflected in the WPI.
The data once again underscores the problems that the United Progressive Alliance (UPA) government on trying to control prices of politically sensitive items like food, a point underscored by World Bank president Robert Zoellick in a recent speech at Washington. “Since 2005, the prices of staples have jumped 80%. Last month, the real price of rice hit a 19-year high; the real price of wheat rose to a 28-year high”, he had said.
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Friday, April 11, 2008
Inflation at a new high of 7.41%
Friday, March 7, 2008
Inflation breaches RBI tolerance limit
Inflation continued its surging trend, breaching the RBI’s “self-imposed tolerance limit” to close the week ended February 23 at 5.02 per cent. Analysts said the mounting inflationary pressure could tie down the RBI from loosening monetary policy, even though the economy is showing signs of a slowdown. The central bank has set an upper limit of 5 per cent till March-end and 4.5 per cent by January 2009.
The spurt in the WPI-based inflation rate, which touched a 9-month high during the latest week, was driven by increase in prices across the board, with food prices, as well as manufactured products, turning dearer.
It was the first time since June 2, 2007, that inflation had climbed back over 5 per cent. Headline inflation rate had fallen to a five-year low of 3.07 per cent in October, from 6.69 per cent end-Jan 2007 due to a combination of base effect and monetary and fiscal steps by the RBI and the Centre. However, inflation started moving up again towards the end of calendar 2007 due to increasing commodity prices.
Inflation at 9-month high, above 5%
The wholesale price index (WPI) based inflation rate today reached a nine-month high of 5.02% for the week ended February 23, as prices of food and some manufactured products went up.
Crossing RBI's comfort level of 4-4.5% in the medium term, the inlfation during the previous week stood at 4.89%. The inflation rate stood at 6.20% in the corresponding week a year ago.
This may further raise fears of RBI continuing with its tough monetary policy stance.
During the week prices of fish marine, mutton, fruits, vegetables and milk went up, while the rates of arhar and moong declined. However, the index for fuel, power, light and lubricants remained unchanged.
The government had raised petrol and diesel prices on February 14. Among manufactured products imported edible oil, vanaspati, coconut oil, mustered oil, got expensive.
