Date:02/10/2004 URL: http://www.thehindu.com/2004/10/02/stories/2004100202981600.htm

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Inflationary surge contained

By Our Special Correspondent

NEW DELHI, OCT. 1. The fiscal and monetary measures introduced by the Government some weeks ago have been able to check the inflationary surge noticed since July this year. After a marginal increase in the previous week, inflation dipped by 0.07 per cent to 7.80 per cent for the week ended September 18. Inflation was at 5.02 per cent in the similar week last year.

The point-to-point Wholesale Price Index (WPI) inflation fell from the previous week's level of 7.87 per cent even as manufactured items and food products became costlier. Since the Government has not allowed the domestic oil companies to raise fuel prices, they remained unchanged for the second week despite volatility in the international oil markets.

As had been anticipated by analysts, there is expectation that the inflation rate may come down in a few weeks once the full effect of Cash Reserve Ratio (CRR) hike takes place. The Reserve Bank had hiked the CRR in two tranches of 0.25 per cent each on net demand and time liabilities of banks with effect from September 18 and October 2. Also, with inflation being higher in the corresponding period of last year, the surge this year is likely to even out.

Moreover, the decision of the Organisation of Petroleum Exporting Countries (OPEC) to boost oil supplies by one million barrel a day from November 1 is expected to take the pressure off from global markets, which provide some respite to the developing countries.