New Delhi, July 4: India’s annual rate of inflation for the week ended June 21 rose once again to reach 11.63 per cent, its highest in more than 13 years. The provisional estimate for the wholesale price index (WPI), which is used for measuring inflation, was 237.1, up from 236.1 last year. The rise in inflation was primarily led by a rise in the prices of manufactured items and primary articles, which together constitute 85.77 per cent of the WPI. Both rose by 0.5 per cent each over the pas week. Ironically, the index for the fuel group — high prices of which are the primary cause for the rise in the prices of the other groups — declined by 0.1 per cent owing to a fall in the price of furnace oil in the previous week.

The central government had hiked the prices of fuel and fuel products last month to ease the pressure of soaring international prices of crude oil on the fiscal deficit. This, in turn, was expected to cause another spiral of higher prices in manufactured products and primary goods. Sonal Varma, economist at Lehman Brothers India, believes that effect has started coming through. She further adds that the effect of the hike in fuel prices on inflation will show up in two stages—one where the high input prices are passed on to the consumers and the second stage where high prices create a wage spiral. "There are some signs that the first effect may be coming through but it doesn't look like the latter has happened yet," she said.

Madan Sabnavis, chief economist at the National Commodities and Derivatives Exchange, also says that this is only the beginning of the second-round effects. “There is generally a lag of 2-3 months before the full effect of such price hikes plays out. As inflation rises, wages also go up over time, which is the reason why the Reserve Bank has been taking monetary tightening measures as a way of curbing inflationary expectations," he said. He, however, added that the RBI might not take any more monetary tightening measures.

The BSE Sensex climbed 2.8 per cent today as investors picked bargains in the battered market, after political worries appeared to be easing. The 30-share BSE index rose 359.89 points to 13,454, with 26 components gaining. For the week, the market dropped 2.5 per cent, stretching losses to seven weeks in a row, the longest run of declines in seven years. No. 2 mobile operator Reliance Communications Ltd rebounded 12.5 per cent to Rs 438.20, its biggest one-day gain in just over two years on expectations some clarity may emerge on the status of its exclusive talks with MTN that end next week.