New Delhi, August 14 : What goes up may not always come down. India’s annual provisional rate of Inflation accelerated to 12.44 per cent in the week ended August 2, up from 12.01 per cent in the previous week. This is the sharpest rise witnessed in the index in eight weeks since it jumped from 8.75 to hit the 11 per cent mark. Reacting to the surge, the finance ministry said in a release that it was a major disappointment.
The annual rate of inflation for the week ended June 7 was also revised upwards to 11.66 per cent from the earlier provisional figure of 11.05 per cent. Experts believe that the final estimate for inflation for the current week could be as high as 13 per cent, considering the general difference between the provisional and final estimates for any given week. Outgoing chairman of the Prime Minister’s economic advisory council C Rangarajan had said that inflation could touch 13 per cent in the near future, but is expected to cool down to 8-9 per cent by March next year.
The rise occurred largely as a result of a spike in prices of primary articles and Oil products. The index for food articles rose by 0.6 per cent while that for non-food articles rose by 0.2 per cent. This rise was primarily because of a surge in the prices of maize, certain lentils, fruits and vegetables, marine fish, rubber, tobacco, linseed and cottonseed. The index for the fuel and power group of commodities went up by 0.9 per cent owing largely to higher prices of light diesel oil, bitumen and furnace oil and aviation turbine fuel.
However, the index for manufactured products came down by 0.05 per cent. Sonal Varma, economist with Lehman Brothers India, said, “It is comforting that the manufacturing segment has shown a decline. It means manufacturers are not passing on higher input prices to consumers.” Varma believes that there is little reason for the central bank to raise the repo rate — the discount rate at which banks sell bonds to the RBI — considering that the cost of borrowing has already become quite high.
