Special Correspondent

Price rise caused by dearer cement and vegetables

NEW DELHI: In a worrisome development for the UPA Government, especially when elections are round the corner in Uttar Pradesh, the rate of inflation crawled up again to 6.46 per cent during the first post-budget week ended March 3 from 6.10 per cent in the previous week.

The main culprits for the price spiral were costlier vegetables as well as cement, the prices of which were hiked by manufacturers after the budget.

According to the first post-budget data on the wholesale price index (WPI), the prices of vegetables surged by seven per cent, while cement turned dearer by 4.4 per cent after the budget imposed differential excise duties on the commodity to rein in prices.

More significantly, the cement producers hiked prices in response to the increase in the excise duty by Rs 200 over and above the earlier levy of Rs 400 a tonne on a 50 kg bag of cement sold at a rate higher than Rs 190. For cement sold at less than Rs 190, the excise levy was lowered by Rs. 50 to Rs. 350 a tonne. After days of dilly-dallying, the cement producers eventually agreed to hold the price line for a year, while assuring lower prices only if duty reductions are announced.

However, a decline was noticed in the prices of poultry chicken (14 per cent), tea (10 per cent), urad (six per cent) and condiment and spices (four per cent). The prices of other food articles such as wheat, gram, arhar, bajra and jowar also fell by one to two per cent.

Particularly disconcerting is the fact that the inflationary pressures continue to hold sway even after the Government and the Reserve Bank of India (RBI) clamped a number of fiscal and monetary measures to contain the price spiral. Incidentally, in its forecast, the economic think-tank Institute of Economic Growth, has said that the inflation rate would remain above six per cent during the three-month period ending May 11, primarily owing to the `hesitant' monetary measures taken by the RBI.

Meanwhile, even as the Citigroup has predicted the inflationary pressures to remain for another two months till the Government's measures take effect in a wholesome way, the RBI has decided to conduct a survey on the inflationary expectations of the people at large.