The Hindu : Front Page : Inflation rate climbs up again

Online edition of India's National Newspaper
Saturday, Sep 11, 2004

Front Page

Inflation rate climbs up again

By Alok Mukherjee

NEW DELHI, SEPT. 10. Despite the Prime Minister, Manmohan Singh's claim last week that the Government would soon gain mastery over inflation, an all-round hike in the prices of primary articles, fuels and manufactured products pushed it up to a new four-year high at 8.33 per cent for the week ended August 28 compared to 8.17 per cent in the preceding week.

Inflation has been on the rise for the last few weeks despite customs and excise duty cuts in petrol, diesel, kerosene and cooking gas (LPG).

The latest figure is more than double the 3.88 per cent recorded in the corresponding period last year. Market sources said the recent spurt was more due to the soaring prices of certain manufactured items, including food products, basic metals and machinery. Another reason for the higher inflation is the truckers' strike that took place in the last week of August.

Rise in China too

Analysts say that the high inflation rate is not an isolated Indian phenomenon as inflation has been rising in several Asian countries.

In China, for instance, the consumer price index rose 5.3 per cent in the year through July, despite the fact that the Government there regulates the prices for many consumer goods and services. In case of the industrial prices, fewer of which are controlled, the increase has been as high as 14 per cent in the first seven months of 2004.

In India, there is also the problem of excess liquidity with the annual money supply growing at 14.8 per cent, higher than the target rate of 14 per cent for the 2004-05 fiscal year.

It is also higher than the 11.9 per cent growth registered during the corresponding period of last year. The excess money supply is mainly due to the continuing surge in the foreign exchange reserves that remain at over $118 billion despite some dips in recent weeks.

Hope on the oil front

However, analysts still believe that the inflation rate would moderate in the coming weeks, particularly because the international oil scenario has lost much of its volatility and the crude prices have started softening.

Besides, the increased competition in the market has compelled industry to absorb some of the raw material price increase that could also help in taming the inflationary spiral.

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