Inflation down a tad, but 7% itch remains
THE annual rate of inflation eased to 7.14% for the week ended April 5 from the previous week’s 40-month high of 7.41%. However, the price index for all commodities rose 0.27% and that for 25 essential commodities 0.32% over the seven days from March 29 to April 5 this year. In other words, neither the government nor the Reserve Bank is likely to budge from their tough anti-inflation postures for now. Indeed, the RBI has hiked the cash reserve ratio for banks, and the government ordered the Monopolies and Restrictive Trade Practices Commission to investigate perceived cartelisation in some sectors. Edible oil prices fell by 1.8% over the week, reflecting import duty cuts on crude and refined oil announced on March 31 as part of the government’s anti-inflation strategy. This contributed to the decline in inflation. But a larger contribution came from the so-called base effect —a spurt in the wholesale price index (WPI) for the week ended April 7 2007, against which the price index in the corresponding week of this year is compared to arrive at the rate of inflation. Prices have surged, as compared to a year ago, across all categories: primary articles (7.7%), manufactured products (7.04%), and fuels, power, light and lubricants (6.77%). Inflationary expectations continue to loom over the economy due to hardening prices of commodities in the international market, and supply constraints on the domestic front. Thus, inflation is expected to hold up above 7% the for next 2-3 months, say experts The government classifies 30 items as essential commodities, of which 27 are included in the wholesale price index with a combined weightage of 17.8%. Of these, prices of coke and kerosene are controlled by the government. This group, excluding coke and kerosene, registered an annual inflation of 6.35%, up from 6.07% for the previous week ended March 29.