The Hindu : Front Page : Inflation nears eight per cent

Online edition of India's National Newspaper
Saturday, Aug 21, 2004

Front Page

Inflation nears eight per cent

By Alok Mukherjee

NEW DELHI, AUG. 20. The rate of inflation continued its upward spiral for the third consecutive week to touch about eight per cent for the week ended August 7. The exact rate for that week was 7.96 per cent, significantly higher than the 3.89 per cent recorded in the corresponding period last year.

Though inflation has been inching up this fiscal, it hit the headlines by jumping about one percentage point to 7.51 per cent for the week ended July 24. By July 31, it had climbed to 7.61 per cent and reached 7.96 per cent by August 7. The actual rate could, however, turn out to be still higher as the provisional figure of 5.89 per cent for the week ended June 12 now stands revised to 6.58 per cent.

Economists had anticipated that the August 7 rate would be higher because the fuel price hike announced on July 31 had been factored into it. Now, it is expected that the rate of increase could be tempered in the coming weeks because the Government averted a further hike in fuel prices on August 14 by reducing the customs and excise duties on crude and petroleum products.

Analysts also believe that the 7.96 per cent could be the peak rate for inflation, after which it could taper off, provided the international oil prices stabilise. But the scenario continues to be extremely uncertain with crude prices rising above $ 47 a barrel. In case the increase continues, a further inflationary push is likely as the Government has practically lost all elbow room on the duty front to cushion the impact of high international prices.

Crude price fluctuation

Global crude prices are ruling at unprecedented levels due to terror threats to the oil pipelines in Iraq and some other West Asian countries and a potential disruption in exports from Russia with the largest Russian oil company, Yukos, in financial trouble. The situation is further complicated by developments in Nigeria and Venezuela, which has led to significant speculator activity in the market. Besides, growing demand in India, China and the United States has added to the pressure on prices.

Compounding the problem for the United Progressive Alliance Government is the drought-flood scenario in various parts of the country, leading to disruption in supplies and providing play to speculators. The prices of several essential commodities, including fruits and vegetables, have almost doubled. Much also depends on the proposed truckers strike from tomorrow on the service tax issue.

The Government has announced another fiscal measure in an effort to dampen the inflationary pressures. Effective today, the customs duty on non-alloy steel (other than seconds and defectives) under specified customs tariff headings have been reduced from 10 per cent to five per cent. The five per cent customs duty on melting scrap of iron and steel (other than stainless steel or heat resisting steel) has been withdrawn and the customs duty on ships for breaking up reduced from 15 per cent to five per cent.

Printer friendly page
Send this article to Friends by E-Mail

Front Page

News Update

Stories in this Section

Uma Bharti issue rocks Parliament

Inflation nears eight per cent

`No question of resigning'

Curfew relaxed in Manipur

Italian wins 20-km walk

Phelps wins fifth gold