The Hindu : Front Page : Inflation soars to 13-month high

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Saturday, Mar 29, 2008
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Inflation soars to 13-month high

Ashok Dasgupta

NEW DELHI: In an alarming post-budget surge, the inflation rate soared to a 13-month high of 6.68 per cent in the week ended March 15 this year.

The spurt in inflation, inching close to the peak of 6.73 per cent touched in February 2007, has been mainly due to a runaway increase in the prices of essential commodities such as staples, edible oils, vegetables and other food articles, coupled with higher costs of metals and fuel oils.

With the point-to-point Wholesale Price Index-based inflation jumping from 5.92 per cent just a week ago and galloping towards the 7 per cent mark – much beyond the “comfort zone” of 5 per cent projected earlier by the Reserve Bank of India for 2007-08 – the government and the central bank’s prime concern at the fag-end of the fiscal year would be to douse inflationary expectations and hold the price line.

As an immediate move, before the official release of the WPI data on Friday, the government on Thursday night withdrew 40-50 items such as steel, cement and non-basmati rice, which hitherto enjoyed export benefits under the DEPB (duty entitlement pass book) scheme in its bid to discourage sales overseas and boost domestic supplies.

Further steps soon

Further fiscal steps to tackle the supply management problem are expected in the coming days, especially when the global food and other commodity markets have been on a high.

Instead of a cut in the interest rates, the RBI is expected to maintain the status quo, as high prices hurt the ‘aam aadmi’ the most. The bank is slated to announce its annual credit and monetary policy late next month.

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