Inflation eases to 9.22 percent in July (Lead)

August 16th, 2011 - 7:21 pm ICT by IANS  

Pranab Mukherjee New Delhi, Aug 16 (IANS) Inflation based on wholesale price index declined marginally to 9.22 percent in July, the lowest level in eight months, from 9.44 percent in the previous month on the back of slower rise in the prices of food articles and petroleum products, official data showed Tuesday.

Final inflation figure for May is revised upward to 9.56 percent from the provisional figure of 9.06 percent reported July 14, according to data released by the Ministry of Commerce and Industry.

Near double-digit inflation gives rise to speculation that the Reserve Bank of India (RBI) might further hike interest rates in its upcoming policy review Sep 16.

The RBI has hiked its policy rates 11 times since March 2010 to curb inflation.

Reacting to the monthly figure, Finance Minister Pranab Mukherjee said the series of rate hikes by the Reserve Bank of India and the expected good monsoon would help further moderate inflationary pressure.

“The measures taken to remove supply constraints in some of the agricultural products and the monetary policy adopted by the RBI will help bring about moderation of inflationary pressure,” Mukherjee told reporters here.

He said the government was working in tandem with the RBI to bring down inflation to a comfortable level.

In its monetary policy review in July, the central bank hiked key policy rates by 50 basis points. The repurchase rate, the interest the central bank levies on short-term borrowing by commercial banks, has been hiked to 8 percent from 7.5 percent and reverse repurchase rate, or interest paid on short-term lending, raised to 7 percent from 6.5 percent.

Despite 11 consecutive rate hike, inflation has remained stubbornly high almost near double-digit, much above the central bank’s comfort level of 4-5 percent.

Build-up inflation in the current financial year till the end of July was 3.01 percent compared to a build-up of 3.45 percent in the corresponding period of the previous year, official data showed.

The index primary articles, which has 20.12 percent weight in the WPI, rose by 0.2 percent to 197.9 in July from 197.5 in the previous month.

The index for fuel and power rose by 2.5 percent to 165.6 in the month under review from 161.6 in the previous month. Kerosene became costlier by 13 percent, prices of LPG rose 11 percent and diesel became costlier seven percent year-on-year.

The government had raised the prices of kerosene, LPG and diesel in view of the high crude oil prices in the international markets.

The index of manufactured products, which has 64.97 percent weight in the WPI, rose by 0.3 percent to 137.7 in July from 137.3 in the previous month.

According to data released last week, annual food inflation rose to 9.9 percent for the week ended July 30 from 8.04 percent in the previous week.

Planning Commission Deputy Chairman Montek Singh Ahluwalia said decline was along expected lines and the government would remain vigilant as the figure was still much above the comfort level.

“It’s good that it is declining but it is still high. We have to be vigilant,” Ahluwalia said.

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