NEW DELHI: Wholesale price-based inflation breached the RBI’s tolerance level of 5% for the third week in a row, recording an eleven-month high of 5.92% for the week ended March 5, compared with 5.11% in the previous week. The government, in turn, slashed import duties on edible oil and rice.
Inflation surged by 0.81% over the previous week, as essential items like fruits, vegetables and pulses, as well as some manufactured items like imported oil, mustard oil and steel, became dearer. Inflation had been at 6.51% during the corresponding week in the year-ago period. The government, which is in a bind over rising prices, is working on a warfooting to contain the price line. Apart from the cut in customs duties on crude and refined edible oils (to 20% and 27.5% respectively) effected today, and the existing ban on export of edible oil, the government is also contemplating an export duty on steel, to increase domestic supplies.
Experts say that there is an urgent need to achieve self-sufficiency in products like food and cooking oil in order to bridge the demand-supply mismatch and contain inflation. Global prices of foodgrains like rice and wheat are at record levels and even resorting to imports could put pressure on the price lines.
Beefing up supplies could be a difficult task in the short term and the government will have to fall back on fiscal measures to discourage exports while making imports of essential goods cheaper. Says HDFC bank chief economist Abheek Barua: ‘‘Higher food and oil prices are playing a crucial role in pushing inflation up. There is urgent need to increase the food supply. However, in the short term, as raising productivity is a difficult task, the government may resort to measures such as banning exports of some commodities, and cut the import duty.’‘
The numbers came just a day after the prime minister’s economic advisory council chairman, Mr C Rangarajan, described the inflation rate as a little above comfort level, and said the council does not favour an interest rate cut policy.
Experts feel that as inflation has breached the RBI’s comfort level by a wide margin, it would be more difficult for the central bank to reduce interest rates to bolster the slowing economic growth.
‘‘ The whopping rise in the inflation rate, despite the high base effect, would not allow RBI to go for a rate cut in the near future as it is way above the central bank’s tolerance level of 5%,’’ Crisil principal economist D K Joshi said.
During the week under review, prices rose across all categories. The index of primary articles went up by 0.3%. The prices of arhar, gram and moong went up by 3%. At the same time, fruits, vegetables, maize, condiments and spices were expensive by 1%.
The index of manufactured products too rose by 0.2%. Among manufactured products, prices of imported edible oil went up by 4%, while that of groundnut oil went up by 1%. Coconut and mustard oils were dearer by 3%.
The index of fuel, power and lubricants too went up by 0.1%, as prices of furnace oil rose by 2%. Basic metal, alloys and metal products rose 20%. Prices of blooms and billets and slabs went up by a steep 30%, wire of all kinds by 25%, steel and tensile plates by 20%, and bars and roods by 3%.
Inflation surged by 0.81% over the previous week, as essential items like fruits, vegetables and pulses, as well as some manufactured items like imported oil, mustard oil and steel, became dearer. Inflation had been at 6.51% during the corresponding week in the year-ago period. The government, which is in a bind over rising prices, is working on a warfooting to contain the price line. Apart from the cut in customs duties on crude and refined edible oils (to 20% and 27.5% respectively) effected today, and the existing ban on export of edible oil, the government is also contemplating an export duty on steel, to increase domestic supplies.
Experts say that there is an urgent need to achieve self-sufficiency in products like food and cooking oil in order to bridge the demand-supply mismatch and contain inflation. Global prices of foodgrains like rice and wheat are at record levels and even resorting to imports could put pressure on the price lines.
Beefing up supplies could be a difficult task in the short term and the government will have to fall back on fiscal measures to discourage exports while making imports of essential goods cheaper. Says HDFC bank chief economist Abheek Barua: ‘‘Higher food and oil prices are playing a crucial role in pushing inflation up. There is urgent need to increase the food supply. However, in the short term, as raising productivity is a difficult task, the government may resort to measures such as banning exports of some commodities, and cut the import duty.’‘
The numbers came just a day after the prime minister’s economic advisory council chairman, Mr C Rangarajan, described the inflation rate as a little above comfort level, and said the council does not favour an interest rate cut policy.
Experts feel that as inflation has breached the RBI’s comfort level by a wide margin, it would be more difficult for the central bank to reduce interest rates to bolster the slowing economic growth.
‘‘ The whopping rise in the inflation rate, despite the high base effect, would not allow RBI to go for a rate cut in the near future as it is way above the central bank’s tolerance level of 5%,’’ Crisil principal economist D K Joshi said.
During the week under review, prices rose across all categories. The index of primary articles went up by 0.3%. The prices of arhar, gram and moong went up by 3%. At the same time, fruits, vegetables, maize, condiments and spices were expensive by 1%.
The index of manufactured products too rose by 0.2%. Among manufactured products, prices of imported edible oil went up by 4%, while that of groundnut oil went up by 1%. Coconut and mustard oils were dearer by 3%.
The index of fuel, power and lubricants too went up by 0.1%, as prices of furnace oil rose by 2%. Basic metal, alloys and metal products rose 20%. Prices of blooms and billets and slabs went up by a steep 30%, wire of all kinds by 25%, steel and tensile plates by 20%, and bars and roods by 3%.
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