The Hindu Business Line : Costlier food, steel drive up inflation rate to 7.33%

New Delhi, April 25 After a brief hiatus, the annual Wholesale Price Index-based inflation resumed its upward trend and rose 7.33 per cent during the week ended April 12, accelerating from the previous week’s annual rise of 7.14 per cent, according to data from the Ministry of Commerce and Industry.

Pressure on RBI?

The rise in inflation was driven by increasing cost of food items and rising iron and steel prices, maintaining pressure on the Reserve Bank of India to introduce more measures to contain inflation in its April 29 monetary-policy announcement.

The Wholesale Price Index of all commodities increased to 226.9 from 226.6 a week ago.

Cooling off

During the latest reported week, edible oils showed signs of cooling off, with annual inflation down to 15 per cent in the commodity category, from 17 per cent a week ago and 20 per cent before that. Vegetable prices, however, renewed their upward trend, rising 10 per cent on a year-on-year basis, while cereal prices shot up 7 per cent. Wholesale prices in the iron and steel category were up 34 per cent on a year-on-year basis, while milk prices and those of dairy products rose 9 per cent.

Cement eases

Cement prices eased marginally to 4.5 per cent during the latest week while in the fuels category, mineral oil prices were up 9 per cent during the latest week.

In line with the trend seen during the past several weeks, the Government has effected a sharp upward revision in the final inflation rate for the week ended February 16 (latest reported week where final numbers are available) to 5.66 per cent, from the provisional estimate 4.89 per cent — a wide gap of 77 basis points.

During the preceding week where final figures were made available (week ended February 9), there was a 63-basis point difference between the final and provisional data, and the week before it was 67-basis point, leading to fears that the actual inflation during the latest week could also be higher than what is being reported provisionally. The Government revises the rate from two months ago after receiving additional price data.

Govt indication

Meanwhile, Finance Minister Mr P Chidambaram said the RBI may introduce more measures to contain inflation in its April 29 monetary-policy announcement.

The Government will seek to maintain the nation’s economic growth momentum amid steps to curb inflation, Mr Chidambaram told Parliament on Friday. Prime Minister Dr Manmohan Singh said the Government will take all possible steps to curb inflation, including increasing the procurement of food grains.

The RBI had, on April 17, raised the Cash Reserve Ratio to a seven-year high of 8 per cent, up from 7.5 per cent earlier. The move was aimed at reducing the supply of money in the financial system by forcing commercial banks to park more money with the Central Bank.

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