Inflation rises to 12.44 percent, finance ministry ‘disappointed’ (Lead)

August 14th, 2008 - 9:25 pm ICT by IANS  

A file-photo of P. Chidambaram

New Delhi, Aug 14 (IANS) India’s annual rate of inflation rose further to 12.44 percent for the week ended Aug 2, goading the finance ministry to say it was a “major disappointment”. Data on wholesale prices released by the commerce ministry Thursday showed that the inflation rate - the highest since May 1994 - has jumped to this level from 12.01 percent for the week ended July 26, and 11.98 percent the week before.

“After being nearly stable for four weeks, this rise has come as a major disappointment,” the finance ministry said in a statement soon after the data was released.

“The annual rate of inflation calculated on point-to-point basis stood at 12.44 percent for the week ending August 2,” stated the ministry of commerce and industry in the official data released Thursday for the wholesale price index (WPI) for all commodities.

The WPI, based on final data for the week ended June 7, stood at 236.5, as compared to 235.2 (provisional), taking the annual rate of inflation to 11.66 percent as compared to 11.05 percent (provisional).

The main reason for the increase in the inflation rate during the week was higher prices of food articles and fuel, both jumping 0.9 percent.

The index for food articles rose on account of higher prices of maize (which rose 4 percent), condiments and spices (3 percent), fruits and vegetables (2 percent). Non-food articles went up by 0.2 percent.

The index for fuel, power, light and lubricants rose due to higher prices of light diesel oil (16 percent), bitumen and furnace oil (8 percent each), and aviation fuel (3 percent).

The finance ministry said that in the primary articles group, the annual point-to-point inflation increased to 11.43 percent as compared to 10.32 percent for the week before.

“In the commodity group of fuel and power, the rate of inflation has risen to 17.99 from 17.12 percent.”

C. Rangarajan, in an exclusive interview to IANS soon after stepping down as the Prime Minister’s Economic Advisory Council (EAC) chairman Wednesday, said he did not rule out the possibility of inflation rate touching the 13 percent mark.

“Inflation may touch the 13 percent-mark,” he said, even as the government projected inflationary trends to moderate to 8-9 percent by March 2009.

“The trends of moderation in inflation should begin in December,” said Rangarajan, now nominated to the Rajya Sabha. He added: “Monetary tightening is needed to contain inflation.”

The statement came a week after Planning Commission Deputy Chairman Montek Singh Ahluwalia said inflation would fall below the 10 percent mark by this fiscal-end.

“Inflation is expected to moderate below the double-digit mark by the end of the current fiscal,” Ahluwalia said.

The latest increase in inflation rate comes on a day the central government revised the recommendations of the Sixth Pay Commission to grant substantial hikes to its five million employees.

However, Finance Minister P. Chidambaram said its impact on inflation was taken into account when the government cleared the recommendations.

“The payout is not a new development. It has been factored into when the Budget was prepared and the Prime Minister’s EAC and the RBI (Reserve Bank of India) gave their estimates,” he said.

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