India's Inflation Rises

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India's inflation rate rose for the second successive week to 0.37% for the week ended September 12. In the preceding week, the figure was 0.12%.

The annual rate of inflation was 12.42% for the corresponding week of the preceding year, say data released Thursday by the Ministry of Commerce and Industry.

The build-up inflation during this fiscal year so far was 6.12%, compared to 6.62% in the corresponding period of the previous year. The 52-week average inflation for the week ended September 12 was 3.22%, the data said.

Going by the provisional figures, the wholesale price index or WPI for all-commodities rose by 0.2% to 242.6 from 242.0 for the preceding week.

WPI-based inflation increased due to the higher prices of fish-inland, maize, wheat and furnace oil, as also sugar and some manufactured products.

The final estimate of inflation for the week ended July 18 was lowered to minus 0.54% from the previous week's provisional figure of minus 1.54%.

The increase in the prices of fish-inland, mutton, condiments and spices, maize, as also wheat, under the 'Food Articles' category, besides those of groundnut seed, gingelly seed, fodder, raw silk as also soyabean under the 'Non-Food Articles" group pushed the growth rate of the index for Primary Articles to 0.2% from the previous week's level. However, those of fish-marine, arhar, fruits and vegetables, bajra, gram, tobacco, rapeseed and mustard seed, raw cotton, raw rubber, copra, cottonseed, castorseed, as also linseed declined.

The index representing fuel, power, light and lubricants rose marginally to 343.5 from 343.4 from the previous week, due to the higher prices of furnace oil.

The index for Manufactured Products rose by 0.3% due to the higher prices of other cables, skelps, bars and rods, rubber- insulated cables, CR coils, PVC resins, lead ingots, CR sheets, carding machines, sugar, khandsari, gur, as also enameled copper wires, whereas that of joist and rolls, rice bran oil, ring spinning and doubling frames, purified terephthalic acid, oilcakes, imported edible oil, caustic soda and automobile spare parts dropped.

Last week, K.C. Chakrabarty, Deputy Governor of Reserve Bank of India or RBI, said the wholesale price index might rise to 6% by this fiscal-end...a development that might pose challenges to the apex bank in maintaining a stable monetary policy. Earlier, the RBI forecast inflation at 5% by March next. Private sector economists say inflation may go as high as 8% by the end of March.

He added that procurement prices grew by 10% every year, resulting in the food inflation of 10%. He admitted that RBI was facing challenges of promoting growth and controlling inflation.

India's Finance Minister Pranab Mukherjee said the stimulus measures introduced in the last fiscal year to protect the country from the impact of the global economic meltdown would continue, until there were signs of a clear recovery in recession-hit U.S and Europe.

As a part of the two stimulus packages announced in December last year and this January, the UPA government in its previous term slashed excise duty by 6% and service tax by 2%.

"I feel there will be some improvement in the third and fourth quarters of this fiscal year. We shall have to wait for some more time before we take any decision to reverse the economic package," Mukherjee said, adding that he would take an overall look into all aspects while formulating budget proposals next year.

He cautioned that Indian policy-makers should keep borrowing costs at a record low to aid economic recovery, even as inflation quickened in Asia's third-biggest economy. At this juncture, he ruled out dear money policy or credit curbs, to avoid affecting growth.

The Government was keen on continuing the low-interest rate regime, he added.

And, RBI Governor D. Subba Rao said recently the apex bank would not reverse its soft money policy unless it was "sure" about the economic recovery. It, however, had said that the higher deficit-spending necessitated by the need to stimulate the economy, made a dearer interest rate regime to control inflation difficult to be enforced.

(Market News Provided by RTTNews)