India’s inflation hits 14-year high of 11.42 percent (Round-up)

June 27th, 2008 - 9:32 pm ICT by IANS  

A file-photo of P. Chidambaram

New Delhi, June 27 (IANS) Squeezing household budgets even further, India’s annual rate of inflation shot up to a 14-year high of 11.42 percent for the week ended June 14, against 11.05 percent for the week before. The alarming data was released Friday against the backdrop of global crude oil prices topping the $140 a barrel mark and several Indian banks revising their interest rates upward to make loans for areas like housing and consumer goods costlier.

The government, however, expressed helplessness at bringing down the inflation rate at least for some time, while analysts expected some more deflationary measures from the central bank.

“Even if prices stabilise, inflation will stay in double-digits for some time. The government is constantly watching the situation,” said Shubhashis Gangopadhyay, advisor to Finance Minister P. Chidambaram.

“Do not harp on the double-digit inflation,” he told reporters at his North Block office in the finance ministry, soon after the commerce ministry released the data on wholesale price index.

The Associated Chambers of Commerce and Industry (Assocham) also agreed with the government’s assessment that double-digit inflation will stay for next several weeks, as higher prices of steel had added a new dimension to the price line.

“Finally, in next few weeks, the inflation would come down to nearly 7-8 percent as government has taken sufficient fiscal and monetary measures to contain the inflation,” chamber president Sajjan Jindal said in a statement.

But such assessments gave little respite to the average citizen.

“I don’t understand the jargon. But one thing is clear - my finances are in a mess,” said Madhu Sinha, a teacher. “All this debate on inflation, double-digit numbers, when it will come down is absolutely meaningless for me.”

The latest wholesale price index data showed that the inflation rate rose during the week due to higher prices of primary articles, up by 0.2 percent, even as the non-food index fell 0.5 percent.

Alarmingly, the final data for the week ended April 19 suggested that the annual inflation was 8.23 percent against 7.57 percent reported earlier based on provisional data.

Prices of fuels also rose 0.1 percent due to higher prices of lubricants (19 percent), while that of rice and bran oil rose by 6 percent each.

India’s central bank had hiked its short-term lending rate by 50 basis points to 8.5 percent and the cash reserve ratio, or the minimum cash balance banks have to maintain, to 8.75 percent of their deposits from 8.25 percent.

Finance Minister P. Chidambaram has said the central bank’s steps were necessary to contain inflation.

“These steps are necessary in the face of rising inflation due to relentless increase in crude oil prices. These steps are expected to have a salutary effect,” he had said Wednesday.

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