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Inflation inches up to 11.91%

NEW DELHI: In what should provide some relief to the government, the rate of inflation inched up only “very marginally” to 11.91 per cent during the week ended July 5 from 11.89 per cent a week earlier, mainly on account of higher prices of certain food articles, iron and steel and various non-administered petroleum products.

The moderate hike in inflation, as per the wholesale price index (WPI) data released here on Thursday, was largely due to higher prices of tea, fruits, maize, certain pulses such as masoor and moong and imported edible oils. Alongside, iron and steel items and petroleum products such as furnace oil, aviation turbine fuel (ATF), bitumen, light diesel oil and naphtha turned more expensive.

Analysing the price movements of various categories of goods included in the WPI, the Finance Ministry claimed that the rate of price rise had stabilised on a week-on-week basis as the prices of various essential items either declined or remained static.

In a statement, the Ministry said: “Inflation, on a week-on-week basis, has stabilised …”

For the group of 30 essential commodities, the statement pointed out, the annual inflation rate declined to 5.74 per cent during the week from 5.98 per cent the previous week.

Out of 98 articles in the primary group, while 13 have shown a fall in prices, 57 other items showed no rise during the week. In the category of manufactured products, while 281 out of a total 320 items showed no increase in prices compared to the previous week, the prices of 12 commodities witnessed a decline. However, in the category of fuel and other products, the Ministry conceded, there was an increase in the prices of ATF, furnace oil, light diesel oil and naphtha and explained that these were market-driven by higher global crude prices.

While there are some signs of respite, the pressure on prices still persist and point to further monetary tightening by the RBI during its credit policy review on July 29. An indication of this was given by Finance Minister P. Chidambaram earlier in the day: “I met RBI Governor Y.V. Reddy. He said there is still pressure on prices ... I am in broad agreement with him.”

However, Mr. Chidambaram pointed out that the tightening of money supply by the RBI in the recent past was appearing to have some effect which could be seen from the escalating overnight inter-bank call money rates.

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