Special Correspondent

WPI inflation is set to breach the double-digit mark on account of high fuel prices

NEW DELHI: Even as food inflation eased further marginally to 16.22 per cent for the week ended March 13 from 16.30 per cent in the previous week, the overall WPI (wholesale price index) inflation for the month is set to breach the double-digit mark on account of high fuel prices and the spill-over effect on non-food items.

During the week, although a fall in the prices of certain vegetables such as onions coupled with a slower pace of price rise in other edibles led to the eight basis points decline in food inflation, petrol prices went up by 16.82 per cent, while diesel was 14.99 per cent dearer on a year-on-year basis, following the hike in duties on petrol and diesel.

In the event, even as food inflation is expected to soften considerably over the next few months with the arrival of rabi crops, a spurt in manufacturing inflation is on the cards owing to the cascading effect of an across-the-board hike in excise duty from eight per cent to 10 per cent as part of roll-back of the stimulus measures. With Finance Minister Pranab Mukherjee having admitted post-budget that a double-digit overall inflation would not come as a surprise to him, the government's prime concern now is to contain the price spiral through monetary and other measures.

The recent increase in key rates by the Reserve Bank of India (RBI) is a strong signal in that direction. On Friday last week, the apex bank raised the short-term lending and borrowing (repo and reverse repo) rates by 25 basis points each to 5 per cent and 3.5 per cent, respectively, as a measure to check inflation from spreading to non-food items. During the week, while onions were 6.64 per cent cheaper, the prices of potatoes went up by a mere 5.62 per cent on a yearly basis.