Date:17/05/2008 URL: http://www.thehindu.com/2008/05/17/stories/2008051750220100.htm

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Inflation rate up to 7.83 %

Special Correspondent

Chidambaram warns steel, cement producers

“For the time being, we simply have to remain a little patient”
Surge in prices is “indeed worrying,” says Chidambaram

NEW DELHI: Contrary to government’s expectations, the surge in the rate of inflation continued unabated to touch a 44-month high at 7.83 per cent during the week ended May 3 as compared to 7.61 per cent in the previous week, mainly owing to the relentless rise in prices of food articles and industrial fuels.

More worrisome was the spurt in the revised inflation figure at 7.78 per cent for the week ended March 8 from the provisional 5.92 per cent as it only revealed that the initial data on the price spiral was grossly underestimated.

In a tizzy

With this, the government appeared to be in a tizzy. For, while the depreciating rupee in recent days would be eroding the effect of the fiscal measures and lead to import of inflation, the government would also have to make a choice between addressing the growth slowdown and spiralling prices, especially when crude oil prices have been touching new highs.

Concerned over the runaway increase in prices, Finance Minister P. Chidambaram warned steel and cement producers of more administrative steps if the roll-backs announced by them were not found enough to hold the price line.

“As I said, we are waiting for steel and cement [prices] reductions to come into force, but we always reserve the right to take administrative measures if they are not enough. But for the time being, we simply have to remain a little patient,” the Minister said on the sidelines of a FICCI function here for CSR awards.

Core industries

Incidentally, steel and cement are the two core sector industries that together account for about 12 per cent of the overall inflation as measured by the wholesale price index (WPI). A worried Finance Minister pointed out that “if steel and cement [price cuts] kick in, there is still expectation that inflation will moderate.”

For the week ended May 3, even as the inflation soared to nearly a four-year high, the data revealed that iron and steel prices had declined by 1.7 per cent and cement by 0.4 per cent. Mr. Chidambaram noted that the surge in prices was “indeed worrying”, but the fall in inflation rate in the primary articles group was “a silver lining amidst dark clouds.”

As for the price pressure in fuel, power, light and lubricant category is concerned, he said: “Unless crude prices decline, I am afraid we are stuck with high inflation in that group.”