Date:07/11/2008 URL: http://www.thehindu.com/2008/11/07/stories/2008110761651600.htm

Business

Inflation inches up to 10.72%

Special Correspondent

NEW DELHI: After declining for five weeks in a row, the rate of inflation inched up to 10.72 per cent for the week ended October 25 from 10.68 per cent in the previous week, mainly on account of higher prices of certain essentials such as vegetables, pulses and cereals coupled with some manufactured items.

Even as the infusion of additional liquidity by the Reserve Bank of India (RBI) is expected to be non-inflationary in the wake of the economic slowdown, the reversal in the downward trend in wholesale price index-based inflation has come about on account of the rising prices of essential consumption items such as wheat, rice, potato, salt, tea and butter.

Analysing the WPI data, the Finance Ministry in a statement said the prices of six out of 30 essential items rose during the week.

“Inflation of 30 essential commodities (taken together) marginally increased to 7.51 per cent as on the week ending October 25, 2008, from 7.47 per cent reported in the earlier week,” it said. Also, while the ‘fuel and power’ group index remained unchanged, inflation for the ‘primary articles’ group increased to 11.41 per cent from 10.92 per cent a week ago.

“An aberration”

Crisil’s Principal Economist D.K. Joshi viewed that the spike in inflation was merely an aberration and the declining trend in the price spiral would continue.

“The infusion in liquidity is non-inflationary as demand in the economy is coming down,” he said. Interestingly, broking house Edelweiss Securities said it expected the country to have near zero inflation in certain periods of the second half of 2009 on account of economic slowdown and falling commodity prices. Echoing similar views, ICRIER Director Rajiv Kumar also agreed that the current rise in inflation rate was a “technical blip” as while global commodity prices were on a declining trend, the demand for goods was also going down.

WPI inflation, it may be recalled, peaked to 12.91 per cent on August 9 and started declining. As per RBI’s projection, the inflation rate is expected to slide further to touch seven per cent by the end of the current fiscal.

During the week, while the prices of rice went up by three per cent, tea by two per cent and vegetables by about one per cent, the prices of automobiles, including auto-rickshaws, rose by six per cent and motorcycles by one per cent even in the wake of falling prices of steel.