Inflation rate surges to 1.51%

The wholesale price inflation rose at its fastest pace in six months, with the annual Wholesale Price Index-based inflation rate surging 1.51 per cent during the week ended October 17, up from the previous week’s annual rise of 1.21 per cent.

Inflation was recorded at 10.82 per cent during the corresponding week of the previous year. The official WPI for ‘All Commodities’ for the latest week remained unchanged at previous level of 242.2 points.

Deflationary phase?

Data released by the Finance Ministry on the contribution of broad commodity groups to the year-on-year inflation during the latest week show that primary articles contributed 227 per cent to inflation, a quadrupling of its share from 56 per cent in the previous week.

In manufactured products, the contribution to inflation was 166 per cent in the week under reference, from 90 per cent in the previous week. The fuels group, on the other hand, showed a negative contribution at (-) 289 per cent against (-) 46 per cent the previous week, registering a six-fold drop.

Even as analysts predict that inflation is likely to turn negative starting April and could remain so until the end of 2009, the Government, on its part, allayed fears that the economy could be entering a deflationary phase. “I do not see any sign of deflation right now. Probably, the decline in inflation is more due to higher base last year than any significant drop in prices,” the Cabinet Secretary, Mr K.M. Chandrasekhar, told presspersons on the sidelines of an event here.

The International Monetary Fund, earlier this week, said that India should rely more on monetary policy to support the economy as high public debt makes fiscal efforts difficult. The RBI had, on March 4, cut its key repo rate to an all-time low of 5 per cent, having pruned it by 400 basis points since October.

Source: Business Line

Inflation plummets to 0.44%

The annual Wholesale Price Index-based inflation inched closer to zero in the first week of March, setting the stage for the Reserve Bank of India to cut interest rates further to prop up growth.

Despite the decline in the headline inflation estimate to a three-decade low of 0.44 per cent, food products inflation continues to rule high and hurt at the consumer-level. The latest Consumer Price Index for Industrial Workers, to be released on Friday, is expected to be around 10.4 per cent.

According to data released by the Ministry of Commerce and Industry here on Thursday, the annual WPI inflation rose 0.44 per cent for the week ended March 7, sharply lower than the previous week’s annual rise of 2.43 per cent. Inflation was recorded at 7.78 per cent a year ago and the sharp dip in the latest reported week has been partially attributed to the base effect coming into play.

The drop of 199 basis points in the latest WPI inflation estimate is the steepest since the week ended November 1, 2008. There is no record of inflation dipping this low since 1977-78, according to Government estimates.

The sharp fall in headline inflation during the latest reported week was on account of an across-the-board dip in inflation levels. In primary articles, the year-on-year inflation dipped to 4.4 per cent for the latest reported week, against 5.8 per cent the previous week. In food articles, inflation fell to 7.4 per cent after being stable at 8.3 per cent in the previous two weeks. Cereals, pulses, salt, milk and sugar, however, clocked high relatively year-on-year inflation rates.

In the fuel and power group, inflation dipped further to clock minus 6 per cent versus minus 5.1 per cent in the earlier week. In manufactured products, inflation rate decreased to 1.3 per cent in the current week, from 4 per cent last week. Inflation in most sub-groups declined or remained steady relative to rates recorded in the previous week.

Inflation surges to 40-month high

RISING INFLATION :

   With no let-up in prices of vegetables, milk, edible oils, fuels and iron and steel, inflation spiked sharply to its highest levels since November 2004, even as fresh industrial production data reflected signs of a pick-up in output.

  The easing of concerns about the extent of a slowdown in the broader economy, amid the sustained upward spiral in price levels, increases the odds that the RBI might opt to tighten monetary policy when it holds a review at the end of the month, analysts point out.

  The annual Wholesale Price Index-based inflation rose 7.41 per cent during the week up to March 29, up sharply from the previous week’s 7 per cent rise. During the latest week, wholesale prices in the iron and steel category were up a whopping 34 per cent on a year-on-year basis, while edible oil prices shot up 20 per cent.

  Among essential items, cereal prices jumped 7 per cent, vegetables were up 16 per cent, while prices of both milk and spices spurted 8 per cent in the wholesale markets. Dairy products were up 9 per cent, while cement prices jumped 5 per cent. In the fuels category, both mineral oil and coal prices were up 9 per cent.

  Meanwhile, industrial production grew 8.6 per cent this February from a year earlier, higher than January’s upwardly revised 5.8 per cent rise, according to IIP data released on Friday. This, however, was lower than the 11 per cent recorded during the same month a year ago.

  During the month, manufacturing clocked an 8.6-per cent growth, electricity generation was up 9.8 per cent while mining output was up 7.5 per cent.

  The strongest growth was in consumer non-durables, including items such as toothpaste and soaps, which rose 11 per cent from February a year ago, while momentum in the capital goods segment picked up, with a 10.4 per cent rise in output after January’s dismal 2.1 per cent (pre-revised). Consumer durables recorded a 3.3 per cent growth.
Ban on exports


   Adding to the series of measures already in place to curb rising prices, the Government on Friday announced a ban on cement exports, besides withdrawing export incentives for rice and primary steel items in its new Foreign Trade Policy. The Government has already banned export of non-basmati rice, edible oils and pulses in an attempt to curb inflation.

    The Cabinet Committee on Prices is now slated to consider a fresh set of proposals next week, including a ban on steel exports.

The Cabinet panel is also likely to consider proposals like a cut in excise duty on finished steel and scrapping customs duty on imported steel.
‘Global phenomenon’


  Responding to the latest inflation numbers, the Centre termed soaring prices as a global phenomenon and said it was taking all possible steps to contain the rise. “The Government has no magic wand to bring down inflation. Due to a rise in prices worldwide, it has become an imported inflation,” the Minister for Science and Technology, Mr Kapil Sibal, said while briefing the  mediapersons after a Cabinet meeting here.