Inflation soars to new high, Chidambaram finds rise marginal (Roundup)

May 9th, 2008 - 8:39 pm ICT by admin  

A file-photo of P. Chidambaram

New Delhi, May 9 (IANS) India’s annual inflation rate soared to a new high of 7.61 percent for the week ended April 26 from 7.57 percent for the week before, affecting the stock market, even as Finance Minister P. Chidambaram called the increase statistically insignificant. The price index released by the ministry of commerce and industry Friday showed increase in prices of tea (11 percent), condiments and spices (3 percent), fish marine (2 percent), fruits and vegetables (1 percent).

Chidamabaram assured that more steps would be taken to rein in prices. There was no need to panic, he held.

“We must have faith in the steps taken. When the steps come together and take effect, there will be moderation. These measures will bear fruit,” Chidamabaram told reporters Friday after a cabinet meeting chaired by Prime Minister Manmohan Singh.

“More administrative measures will be taken if needed. We are also persuading cement companies to roll back prices.” India’s largest cement manufacturer ACC announced Friday that it was freezing prices.

Chidambaram asked the people to be calm and assured that steps taken by the government would take effect, but with a time lag. In the past, the government has banned export of several commodities while lowering duties on imports of some essential items.

“Inflation is nowhere moderating in the world. No country is witnessing a downward trend in prices,” he said, ascribing the price rise to the price of crude oil in the global market, which touched a new high of $125 a barrel Thursday. He described the rise in global commodity prices as a contributing factor to the inflation.

Chidambaram maintained that the rise in inflation for the week under review was not significant statistically, and he said the decelerating trend in inflation rise was a matter of relief for the government.

“The inflation rate going up to 7.61 percent from 7.57 percent is statistically not so significant. It comes as a relief,” he said.

The data on official wholesale price index (WPI) released Thursday revealed that there was an increase of 0.2 percent during the week on account of a 0.5 percent rise in the sub-group of food articles though non-food items declined by 0.2 percent.

The inflation figure being put out by the government every week is from provisional data, and the final data usually shows a higher figure.

This Friday, the government adjusted its figure for the week ended March 1, and said the rate of inflation was actually 6.21 percent, compared to the 5.11 percent it had announced earlier on the basis of provisional data.

Industry leaders said inflation will take at least two more months to moderate.

“Inflation will come down in next two months as sufficient measures have been taken by the government. A few more administrative steps are needed to ensure adequate supplies of fruits, vegetables, as on the manufacturing side, the inflation seems to remain more or less stable,” said Venugopal N. Dhoot, president, Associated Chambers of Commerce and Industry (Assocham) of India.

The government has rolled out several administrative measures like banning futures trade in many items including gram, potato, and rubber and soyabean oil to check prices. The Reserve Bank of India has also increased the cash reserve ratio (CRR) to tighten money supply.

The steel manufacturers in a meeting with Prime Minister Manmohan Singh Wednesday agreed to lower prices of products by between Rs.2,000 and Rs.4,000 per tonne with immediate effect.

A statement Friday from the ministry of food and consumers affairs on the retail prices of farm commodities at different locations showed that there was not much change in the prices over the week ending May 2.

“During the week ending May 2, prices of wheat remained steady at all the reporting centres, while price decreased at Jaipur and Patna. Prices of sugar remained steady at all the reporting centres except for an increase at Delhi and Patna,” the statement said.

“In Delhi, prices of groundnut oil, mustard oil, vanaspati, tea (loose), potato and onion held steady for one week. Prices of rice, wheat, flour, tur dal held steady for one month. Prices of milk and salt held steady for six months. Price of gram pulse decreased from Rs.37 to Rs.36 per kg during the week and that of sugar increased from Rs.17 to Rs.18 per kg,” the statement added.

Some experts feel that instead of knee-jerk reaction to the inflation figures, the government should concentrate on ensuring 4-5 percent annual growth in agricultural output.

“The biggest challenge for India is to grow agriculture at 4-5 percent. There is urgent need to speed up reforms in agriculture,” said Arvind Panagriha, professor of economics, Columbia University. He was speaking here Friday at a function to release his book “India: The Emerging Giant”.

“India’s economic growth will be sustained and will even jump to 10-11 percent if reforms are continued in right earnest,” he added.

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