Inflation up to 11.63 percent; more monetary steps likely (Roundup)July 4th, 2008 - 9:19 pm ICT by IANS
New Delhi, July 4 (IANS) India’s annual rate of inflation for the week ended June 21 maintained an upward trend, rising to 11.63 percent compared to 11.42 percent for the week before. The wholesale price index (WPI) for all commodities released Friday by ministry of commerce and industry showed increase in prices of goods like tea, fruits, vegetables, unrefined oil, tanning materials, texturised yarn, tyre cord, steel and chemicals.
The accelerating inflationary trend comes at a time when the Prime Minister Manmohan Singh-led United Progressive Alliance government faces uncertainty over its future, as its Left allies threaten to withdraw support in protest against the proposed India-US nuclear deal.
Government sources did not rule out more monetary measures to rein in inflation.
“As and when needed, the Reserve Bank of India (RBI) will think of monetary steps to contain inflationary trends,” a senior official, who did not wish to be identified, said Friday.
RBI, India’s apex banking institution, June 24 hiked repo rate or lending rate by 50 basis points to 8.5 percent and cash reserve ratio or the minimum balance a bank is required to maintain to 8.75 percent from 8.25 percent.
India’s central bank is likely to convene a meeting July 29, where the issue of fresh fiscal measures will probably be discussed.
“The government needs to evolve medium and long term plans for agricultural production increase, and moderating the prices of steel and cement,” said Anjan Roy, economic adviser at the Federation of Indian Chambers of Commerce and Industry (Ficci), an industry lobby.
“An increase of 0.21 percent in inflation is not alarming, but calls for measures to bring inflation down to 10 percent first and finally to the tolerable level of 5 percent. The supply side needs to be strengthened,” Roy told IANS.
Agreed Sajjan Jindal, vice-chairman and managing director JSW Steel, and president of the Associated Chambers of Commerce and Industry (Assocham), also an industry lobby.
“Costlier prices of edible oil, food products, fruit and vegetables and even iron and steel fuelled the inflation to 11.63 percent and if their supplies are not maintained, inflation will exceed even 12 percent,” said Jindal in a statement.
“Rising crude oil prices and higher food prices internationally will also further escalate inflation as these are not showing reversal trends,” Jindal said, adding that fiscal steps from the government to contain inflation may bear fruit in the next few weeks.
The index for primary food articles comprising tea, fruits and vegetables rose 0.6 percent while that of non-food articles like raw cotton rose 0.4 percent in the week under review.
Some of the items registering high price rise for the week ending June 21 were unrefined oil (8 percent), texturised yarn (9 percent), basic and foundry pig iron (8 percent), steel sheets, plates and strips (6 percent) and components and accessories of switch gears (10 percent).
Said G. Srivatsava, director, economic policy, Confederation of Indian Industry: “High prices of oil and commodities are driving up inflation.”
The wholesale price index of fuel, power, light and lubricants declined 0.1 percent, while the index for manufactured products like oilcakes rose 0.5 percent.
The data showed an increase of 4 percent in the price of tea while that of fruits and vegetables, maize, bajra and fish marine went up 2 percent each.
The final wholesale price for all commodities stood at 229.1 points for the week ended April 26 and the annual rate of inflation based on final index calculated on point to point basis stood at 8.27 percent.
Tags: annual rate of inflation, bank of india, cash reserve ratio, chambers of commerce and industry, cord steel, economic adviser, fiscal measures, fruits vegetables, indian chambers of commerce, inflationary trends, left allies, manmohan singh, monetary measures, prime minister manmohan, prime minister manmohan singh, rate of inflation, rbi india, reserve bank of india, tyre cord, wholesale price index