India’s annual inflation rate eases to 11.89 percent (Lead)

July 24th, 2008 - 8:30 pm ICT by IANS  

A file-photo of Manmohan Singh

New Delhi, July 24 (IANS) India’s annual rate of inflation eased marginally to 11.89 percent for the week ended July 12 amid a promise by Prime Minister Manmohan Singh that bringing down prices will be his government’s top priority. The data on wholesale prices released by the commerce ministry Friday showed that the inflation rate slid to this level from 11.91 percent for the week ended July 5.

Alarmingly, the final data for the week ended May 17 showed that the year-on-year inflation rate was actually 8.66 percent, as opposed to 8.1 percent based on provisional statistics released earlier.

The main reason for the increase in the inflation rate during the week was higher prices of primary articles, the index for which moved up by 0.6 percent. Coffee, fruits, urad, mutton, arhar, moong and jowar became dearer.

“Inflation, on a week-on-week basis, has continued to remain stable,” a statement by the finance ministry said, soon after the data was released Friday evening.

“Prices of essential commodities which include food grains, pulses, edible oils, vegetables, dairy products and some other commodities including kerosene, soap and safety matches have more or less stabilised.”

In his address at the conclusion of the trust motion Tuesday, the prime minister had listed nine main priorities for his government, in which inflation control was ranked first.

“My priorities are tackling the imported inflation caused by steep increase in oil prices. Our effort is to control inflation without hurting the rate of growth and employment,” the prime minister said.

But many international agencies such as the Asian Development Bank (ADB) warn that economic growth in emerging Asia will slow down in 2008 and 2009, weighed down by higher than expected inflation and a protracted slowdown in the US.

“Inflation will likely continue to plague much of emerging east Asia, as current record global energy and food prices seep down into overall economic activity, and there are few signs that they will subside any time soon,” ADB said.

Opposition parties, which were miffed at not being able to bring the government down, have also vowed to hold nation-wide stir against rising inflation and the UPA coalition’s inability to check soaring prices.

The Reserve Bank of India (RBI) has also raised interest rates more than a dozen times and asked commercial banks to keep more money against deposits in a bid to curb liquidity and inflation.

The next such policy measure is expected July 29 and the industry is worried that a further squeeze in liquidity and hike in interest rates could retard growth, play havoc with corporate profits and cause job loss.

“Rise in interest rates would further push costs of production in the short run, leading to higher inflation,” said Sajjan Jindal, president of the industry lobby Associated Chambers of Commerce and Industry (Assocham).

“Present interest rates are at a peak and any further rise in the rates would hamper growth as well as the employment outlook for the economy,” he said after a meeting among 150 members of the chamber’s managing committee in Mumbai.

“Instead, the government should focus on reforms in sectors like education, agriculture, telecom, insurance, provident fund, logistics and retail, as a long-term strategy to counter inflationary forces in the domestic and external economic system.”

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