India’s inflation overshoots official target (Lead)

April 15th, 2011 - 5:49 pm ICT by IANS  

New Delhi, April 15 (IANS) Despite successive rate hikes and assurances from policy makers, India’s annual rate of inflation rose to 8.98 percent in March from 8.31 percent the month before, way above the target of 8 percent set by the central bank.

The rise in the general price level was primarily driven by a jump in prices of manufactured products, while the fuel index rose due to higher prices of coal, according to data released by the commerce and industry ministry Friday.

The provisional annual rate of inflation for December, which was earier pegged at 8.23 percent for January, was also revised upwards to 9.35 percent.

The data will increase the pressure on the government to address supply side inefficiencies and not just look at prompting the Reserve Bank of India to raise rates to curb inflation — something which the central bank has done eight times in the past 15 months.

“Current figures show monetary policy intervention is not having the desired effect. Contrary to RBI forecasts, headline inflation has crept up. There seems to be a consistent rise in inflation on fuel and power, largely driven by higher coal prices,” said Anis Chakravarty, director, Deloitte, Haskin & Sells.

“It is also a matter of concern that inflation on manufacturing products amplified in March,” he added.

Also, industrial production has been sluggish, resulting in corporate India clamouring for an end to rate hikes by the RBI. The index of industrial production grew by a lower than expected 3.6 percent in February, bogged down by slow manufacturing output, particularly capital goods.

“While there will be pressure on the RBI to raise rates, given the volatility in industrial production, the RBI may do well not to react quickly to these inflation numbers,” said Chakravarty.

The government will also be worried over high prices as five states go to vote in April-May to elect their new legislative assemblies.

However, the limited weekly data for the week ended April 2 showed a third successive decline in food inflation, which was registered at 8.28 percent.

Deputy Chairman of the Planning Commission Montek Singh Ahluwalia said persistent high inflation had raised doubts over achieving a 9 percent growth in the current fiscal.

“Inflation has been a concern. It has not come under control as much as I had hoped. There is need to use fiscal and monetary policy to get rid of supply constraints wherever they exist,” Ahluwalia told reporters here.

Following is the 12-month inflation for some sub-indices within the overall wholesale price index:

–Primary articles: 12.96 percent

–Food Articles: 9.47 percent

–Vegetables: 9.17 percent

–Cereals: 3.96 percent

–Pulses: (-)4.17 percent

–Non-food articles: 25.88 percent

–Fuels and power: 12.92 percent

–Cooking gas: 14.99 percent

–Petrol: 23.14 percent

–Diesel: 6.22 percent

–Manufactured products: 6.21 percent

–Sugar: (-)7.46 percent

–Edible oils: 12.54 percent

–Manmade Textiles: 11.35 percent

–Cotton Textiles: 27.45 percent

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