The Hindu : Front Page : Inflation rate continues to climb

Online edition of India's National Newspaper
Saturday, May 03, 2008
ePaper | Mobile/PDA Version

Front Page

Front Page

Inflation rate continues to climb

Special Correspondent

Touches 42-month high at 7.57 p.c.

NEW DELHI: The rate of inflation continued to soar during the week ended April 19 to touch a 42-month high of 7.57 per cent, mainly owing to increased prices of vegetables, food articles, certain manufactured items, including steel, and some fuel products.

At this level, the point-to-point inflation based on the wholesale price index (WPI) was up 24 basis points from 7.33 per cent in the previous week, despite the concerted measures taken by the Government and the Reserve Bank of India (RBI) to tame the price spiral.

Even as the RBI revised upwards the inflation “tolerance limit” from near five per cent last fiscal to 5.5 per cent for 2008-09 on account of surging prices of crude oil and commodities in global markets, the Government also took a number of fiscal steps entailing a revenue loss of over Rs. 6,300 crore to hold the price line.

The RBI raised the cash reserve ratio (CRR) by 75 basis points to 8.25 per cent in three tranches in quick succession.

Nearly Rs. 27,500 crore is set to get sucked out of the banking system as banks will have to park a larger proportion of their deposits with the Central bank.

According to Crisil’s Principal Economist D.K. Joshi, the steps taken by the Government and the RBI would lead to “easing of inflationary pressure in future and it can come down to 5.5 per cent.”

During the week, however, consumers were most affected by higher prices of milk and rice that increased by one per cent each while vegetables were costlier by 0.3 per cent. The prices of tea, the common man’s beverage, soared by 17 per cent and mutton by two per cent.

In the manufactured products category, the prices of cast iron spun pipes soared by 51 per cent, basic pig and foundry iron by eight per cent and iron sheets and plates were up two per cent.