The Hindu : Front Page : Inflation continues to spiral

Online edition of India's National Newspaper
Saturday, Aug 14, 2004

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Inflation continues to spiral

By Alok Mukherjee

NEW DELHI, AUG. 13 . The inflation rate maintained its upward spiral to reach a 41-month high of 7.61 per cent for the week ended July 31, mainly due to the surge in prices of fruit and vegetables, edible oil and other manufactured products. Last week, the official data revealed the inflation rate to be 7.51 per cent for the week ended July 24.

The sudden spurt caught the Government by surprise and led to a series of meetings between the Prime Minister, Manmohan Singh, the Finance Minister, P. Chidambaram, and the Reserve Bank Governor, Y. Venugopal Reddy.

The RBI Deputy Governor, Rakesh Mohan, was also involved in some of the meetings.

`Measured steps'

After the consultations, Mr. Chidambaram announced that certain "measured steps" would be taken to contain inflation, both on the monetary and fiscal sides.

While the Finance Ministry is expected to alter the customs and excise levies on crude oil and finished petroleum products, the RBI is expected to signal a process to mop up excess liquidity from the economy. These announcements are expected once Parliament reconvenes on Monday.

The Government has also analysed the factors behind the inflation push. The inflation rate this year is high because inflation in the corresponding period last year was at low levels of around 3.6 per cent. Consequently, on the low base the increase is magnified.

The delay in monsoon had created seasonal factors to push up inflation but this is expected to subside since rainfall has revived.

The unprecedented rise in the international oil prices has resulted in import of inflation into the Indian economy.

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