NEW DELHI: The annual rate of inflation based on wholesale prices stood at 12.44% for the week ended August 2, 2008, fuelled by costlier food articles like pulses, maize, fruits and vegetables.
While maize prices were up 4%, moong, urad, condiments and other spices rose 3% each. Fruits and vegetables, jowar and marine fish prices increased 2% each. Overall index of food articles surged 0.9% over the last week.
Inflation stood at 12.01% (provisional) in the previous week. The annual rate of inflation, as measured by the wholesale price index, stood at 4.39% a year ago. Food articles have a weightage of 22.02% in the overall index.
While economists downplayed this spurt in inflation, they apprehend that the Sixth Pay Commission award, which was cleared by the Cabinet on Thursday, will further fuel demand and price rise. Finance minister P Chidambaram, however, said the impact of revised pay scales for central government employees on inflation had been factored in.
“The impact of the Pay Commission report on inflation was already factored into when the Cabinet cleared the report after Committee of Secretaries suggested modifications,” Mr Chidambaram said.
The Prime Minister’s Economic Advisory Council, in its economic outlook, has forecast that inflation would peak to 13% before tapering off to 8-9% by March 2008. The council also doesn’t see any let-up in monetary tightening against this backdrop. Economists also subscribe to this view, but rule out another rate hike as they feel that the measures taken so far are yet to unfold fully.
“The rate of inflation for all commodities for the week ending August 2, 2008, stands at 12.44%, higher than the rate of 12.01% reported last week. After being nearly stable for four weeks, this rise has come as a major disappointment,” a finance ministry statement read.
“It’s more of a base effect and not because of actual price increase. I think that after today's final decision on the Pay Commission, trading community may further go in for a hike in prices. The RBI, however, is expected to keep its rates unchanged in the half-yearly monetary review as the results of earlier monetary tightening measures are still to be felt fully. I think the central bank should wait and watch before taking further measures,” said Rajiv Kumar, director general, ICRIER.
Manufactured products, which have the maximum weight of 63.75% in the WPI index, rose 0.05% last week. Within this category, food products’ group declined 0.5% due to lower prices of imported edible oil (13%), rice bran oil (5%), gingelly oil and cotton seed oil (2% each) and oilcakes, groundnut oil and rape & mustard oil (1% each).
Textiles witnessed a rise in prices in the category of hessian and sacking bags and hessian cloth. Rubber and plastic product group rose 0.3 % due to higher prices of decorative laminates, which were up 13%. BOPP film prices, which moved up 12% in the week under review, pushed up the index for chemical products.
In the fuel category that has a weight of 14.23%, the price of light diesel oil rose substantially by 16% while bitumen and furnace oil increased 8% and aviation turbine fuel 3%. The government has also revised inflation based on the final index at 11.66% compared to 11.05% for the week ended June 7, 2008.
“The more-than-expected jump in the inflation figure can partly be attributed to the fact that a lot of price data was not covered into earlier index. There is a less reason of worry as the total upswing is not because of the actual price rise, but because of revision in index,” said Abheek Barua, chief economist, HDFC Bank. ..The Economic Times
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