The Hindu : Front Page : Inflation up to 8.1 per cent

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Inflation up to 8.1 per cent

Special Correspondent

Worrisome: Chidambaram

NEW DELHI: Fuelled by costlier edibles and manufactured products coupled with the galloping prices of industrial fuels, the rate of inflation for the week ended May 17 spiked to its 45-month high at 8.1 per cent from 7.82 per cent in the previous week. At this level, it is within striking distance of its previous provisional high of 8.33 per cent touched during the week ended August 28, 2004.

Adding to the Government’s worry is the fact that while the current provisional inflation rate, as measured by the wholesale price index (WPI), is certain to breach the 10 per cent mark on revision, the imminent hike in retail prices of petroleum products to offset the losses of oil marketing companies on account of the surge in global crude oil prices is expected to result in a fresh bout of inflation.

Commenting on the price spiral after releasing the higher-than-expected GDP (gross domestic product) figures at a press briefing here on Friday, Finance Minister P. Chidambaram admitted that 8.1 per cent inflation was “worrisome” but noted that the inflationary impact of any hike in petrol and diesel prices would be short-lived as fresh measures would be taken to hold the price line.

“Nobody has drawn any great satisfaction at 8.1 per cent inflation. 8.1 [per cent] is a worrisome inflation. But the measures we have taken have contained inflation. We are confident that we will gain mastery over this inflation…Surely, we are still in full control over the situation,” Mr. Chidambaram said, while pointing out that moderation in inflation would, however, depend on global crude oil and commodity prices.

A silver lining, however, was that fact that even in the wake of inflation and a discernible slowdown in manufacturing, India’s growth story has remained intact. Enthused by a nine per cent GDP growth during 2007-08 on account of higher farm sector production, Mr. Chidambaram expressed optimism that the current fiscal would also witness an overall growth of close to 8.5 per cent if not more.

“Despite rise in commodity and oil prices, financial turbulence and meltdown of some global financial institutions, India has been able to grow at 9 per cent for the third year running…There is no reason to believe we will grow below 8.5 per cent [in the current fiscal]. In fact, one or two among us think we will do better than 8.5 per cent,” he said. Inflation could have soared higher, but for the various fiscal and administrative measures taken to hold the price line.

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