The Hindu Business Line : Rising prices push inflation to a 14-month high at 6.68%

New Delhi, March 28 Inflation shot past the 6 per cent mark to touch its highest levels in nearly 14 months, bolstering speculation that the Reserve Bank of India may have to intervene with a rate hike in the near future.

The widely-tracked Wholesale Price Index (WPI) rose 6.68 per cent for the week ended March 15, sharply higher than the previous week’s annual rise of 5.92 per cent, Government data showed on Friday. The rise in year-on-year prices of products was stoked by an increase in prices across all major heads of the WPI, with inflation in Primary Articles rising to 7.76 per cent during the latest reported week, up from 7.43 per cent during the previous week.

Inflation in primary articles has gone up by 376 basis points within a span of just six weeks, with items such as cereals (up 6.17 per cent), vegetables (3.87 per cent), milk (9.71 per cent), oil seeds (20.12 per cent) showing a spurt in prices during the latest week.

The inflation in the fuel group in the week ended March 15 ruled at an 80-week high, with mineral oil prices up over 9 per cent on an year-on-year basis. Inflation in the heavy-weight Manufactured Products also shot up to a 49-week high of 6.27 per cent in the week ended March 15, with dairy products (9.28 per cent), edible oils (19.03 per cent), cement (4.49 per cent) and iron and steel (26.86 per cent) showing major increase in prices.

Inflation for the latest reported week was the highest since a reading of 6.69 per cent on January 27, 2007, and the fourth consecutive week that the WPI-based inflation has ruled above the five per cent “tolerance limit” set by the RBI for 2007-08.

RBI concern

Meanwhile, the RBI Deputy Governor, Mr Rakesh Mohan, said on Friday that inflation continued to be a “concern”. “The challenge for monetary policy now is to reduce inflation further in the medium term towards international levels, while maintaining the momentum of high growth and preserving financial stability,” Mr Mohan said in a speech at an institute in Ahmedabad. He said the spikes and seasonal falls in inflation will continue to occur due to relative price adjustments and supply shocks from agricultural and commodity prices.

The central bank has kept its main lending rate unchanged at 7.75 per cent for a year, after raising it five times between June 2006 and March 2007 to contain inflationary pressure. The RBI’s next policy review is slated for April 29.

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