Switching over to a new series of Wholesale Price Index (WPI) with 2004-05 as the base year, the government on Tuesday revealed that headline inflation in August stood pegged at a seven-month low of 8.51 per cent as against 9.97 per cent in July under the old series.
Since the two WPI series are not comparable in view of the vast difference in the basket of commodities and their weight in calculating inflation, data on the old series released along with the new index also reflected a drop in the rate of price rise to 9.5 per cent in August.
Under the new WPI series aimed at capturing the price movement in a more realistic way in keeping with the times, the decline in inflation was mainly on account of easing prices of food items such as vegetables, cereals and pulses.
However, with food prices still remaining at uncomfortable levels, Finance Minister Pranab Mukherjee held out an assurance that “appropriate measures” would be taken at an “appropriate time”.
The basic difference between the two series is that the new WPI index with 2004-05 as the base year has a total of 676 items instead of 435 items under the old series which had 1993-94 as the base year. Among the 241 items added to the basket for better reflection of the inflationary spiral are consumer items — essentially used by the middle-class — such as ice-cream, mineral water, readymade food, refrigerators, VCDs, dish antennas, microwave ovens, washing machines, computers and computer stationery and gold as well as silver.
Under the primary article group, there are 102 items in the new series against 98 in the old index although the number of items in the fuel and power category remains unchanged at 19. A substantial increase is in the number of manufactured products that have been included in the index — 555 items as compared to 318 items in the basket under the old series.
Releasing the inflation data for August under the new series here, Commerce and Industry Minister Anand Sharma said: “We hope that it [inflation] will come down. There are various steps taken by the government. Food inflation has been a cause of concern.” Data under the new series revealed that prices of primary articles — food, non-food items and minerals — surged by 15.76 per cent on an annual basis in August. Even as prices of potatoes and onions declined by 47 per cent and 6.7 per cent, respectively, rice was dearer by 8.49 per cent. Among manufactured items — food products, beverages, tobacco, cotton textiles, wood and paper — witnessed an average price rise of 4.78 per cent.
According to economic analysts, headline inflation at close to 9 per cent is likely to prompt the apex bank to hike its key policy rates by 25 basis points later this week as containing the price rise remains a concern. Deloitte's principal economist Shanto Ghosh felt that in an absolute sense, inflation is still high. “Unless there is significant softening in prices across the board, it will be a tough challenge for the government to meet the 5.5 per cent inflation target,” he said.
Sujay Mehdudia writes:
Indian entities create more jobs in U.S.
Faced with the aggressive tone of the Obama administration, India on Tuesday said the recent actions taken by the U.S. with regard to trade issues, offshore outsourcing and hike in visa fee for professionals were not at all welcome.
“Indian IT industry has made a huge global contribution including that in the U.S. It is Indian entities which are responsible for creating jobs, even now when there are big job losses,'' Commerce and Industry Minister Anand Sharma told reporters on the sidelines of an event here on Tuesday.
Mr. Sharma expressed hope that the scheduled India-U.S. Trade Policy Forum (TPF) meeting on September 21 would turn out to be ‘constructive' and resolve various issues. “Many actions taken by the U.S. that adversely impact the economic engagement “are not welcome,'' he remarked.
In a recent move, Ohio Governor Ted Strickland banned offshore outsourcing by government departments. Earlier, the U.S. increased professional visa fees significantly to fund a $600-million programme to secure its border with Mexico. Mr. Sharma and U.S. Trade Representative Ron Kirk will co-chair the TPF, which is the principal trade dialogue between the U.S. and India. Mr. Sharma had recently written to Mr. Kirk on the new visa regime and had termed it discriminatory. However, there has been no official reaction from the U.S. side to the issue or Mr. Sharma's letter till date. The Commerce Minister said the data suggested that Indian IT companies had created over 2.50 lakh jobs in the U.S. in the last three years. “We hope that there will be a constructive and appropriate approach, because both countries are strategic partners,'' he added.
