No respite from inflation, rises to 9.06 percent in May (Lead)

June 14th, 2011 - 7:15 pm ICT by IANS  

Pranab Mukherjee New Delhi, June 14 (IANS) The Indian policy makers’ duel with inflation is going to continue, at least for some more months, as latest data Tuesday showed that annual inflation rose to 9.06 percent in May compared to the like month of 2010.

The rise in the whole sale price index, the barometer that indicates price behaviour, was recorded at 8.66 percent in April.

The latest figures will have an impact on the Reserve Bank of India’s decision to hike interest rates when it takes up the mid-quarter review of the monetary policy on June 16. Most economists expect a 25 basis points increase in key interest rates.

Finance Minister Pranab Mukherjee said that while the rate of food and primary inflation had declined, the core inflation (other than food, fuel and power inflation) continued to harden. He said that this poses some concerns which will have to be addressed.

Tuesday’s figures released by the commerce and industry ministry showed that the manufactured products index, the largest constituent of the wholesale price index — the barometer that indicates price behaviour — shot up 7.27 percent, while the primary articles index rose sharply by 11.3 percent.

The index of food articles too increased by 8.37 percent in May.

The inflation figures for March were also revised upwards to 9.68 percent compared to the provisional figure of 9.04 percent.

A recent survey of urban households conducted by the RBI paints a grim picture as far as inflation is concerned.

Urban households expect inflation to rise further by 40 basis points to 11.9 percent in April-June quarter and by 120 basis points to 12.7 percent during financial year 2011-12 from the perceived current rate of 11.5 percent, the RBI said in the June issue of its monthly bulletin.

“Inflation data for May was higher than our expectations. The rise in manufacturing product inflation is bit negative. This is likely to put more pressure on RBI to continue with the tight policy regime,” said Sanjeev Zarbade, vice president, private client group research, Kotak Securities.

“In order to tame inflationary expectations, RBI is likely to hike the rates by 25 bps. Although the current drivers of inflation are outside the purview of monetary policy, RBI is more concerned to contain pass-through of elevated prices,” he added.

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