Govt Brushes Aside Deflationary Concerns - March 20, 2009

The fears of Indian economy slipping onto a deflationary phase was brushed by the Government on March 19, stating that a sharp fall in inflation this month has more to do with the high base a year ago than any great decline in prices.

The Cabinet Secretary K M Chandrasekhar told I do not see any sign of deflation right now. Probably, decline in inflation is more due to higher base last year than any significant drop in prices. The inflation dipped more than three decade low of 0.44 per cent for the week ended March 7. The industrial production in India reported a contraction for the second month running in January by 0.5 per cent due to the impact of global economic crisis. The exports too have been shrinking by a wide margin of 12-21 per cent for five months in a row since October this fiscal.

The government sees sign of recovery in the select sectors due to stimulus packages between December and February. The automobile as well as cement, steel and infrastructure sectors are growing, Chandrasekhar said. He said the low inflation would certainly weigh on the mind of the central bank and it will be looking at these figures in having its own decisions, he said adding the private sector banks should also join public sectors peers in cutting the interest rates.

RBI Likely To Respond On The Sliding Inflation - Feb 21, 2009

As the inflation numbers are diving to low levels every week there is mounting pressure on RBI to reduce the interest rates. The inflation numbers have fallen to a year-ago level of below 4% has increased expectations that the RBI may further cut in interest rates soon, with the government on Thursday saying that the apex bank may take more monetary measures.

RBI is looking into the monetary policy and will perhaps respond to it (sliding inflation), Commerce and Industry Minister Kamal Nath said in New Delhi

Inflation fell by 47bps to 3.92% from 4.39% a week ago. ICICI Bank CEO K V Kamath also said, when inflation is going towards 2%, there is scope for interest rates to go down.
Crisil Principal Economist D K Joshi said that inflation is on a downward trend due to a strong base effect and low demand and it prompts the RBI to cut interest rates.

Inflation Fell To 5.07 Per Cent - Feb 6, 2009

Inflation fell to 5.07 per cent for the week ended January 24, 2008 as against 5.64% reported the week before and this decline was due to falling prices of fruit as well as the vegetables and manufactured goods, making the room for cuts in policy rates by the Reserve Bank to boost industry. In the primary articles group, the prices of fruit, vegetables and bajra declined by two per cent each, while coffee became cheaper by one per cent.

The inflation slipped by 0.57 percentage points for the week ended January 24 from 5.64 the previous week. It was 4.78 per cent a year ago.

Inflation Rate Has Been Dropped - Jan 10, 2009

The Inflation for the week ended 27th December 2008, declines to ten months low of 5.91%. Inflation rate has been dropped for ninth consecutive weeks and stood at 6.38% in the previous week and 3.74% in the corresponding week of 2007. The primary articles group in the WPI declined by 50 basis points from the previous week while manufactured products group declined by 30 basis points.

However, the previous low was reported at 5.69% for the week ended 23 February 2008. The index of food articles group declined by 0.7% as prices of jowar fell by 5%, fruits and vegetables by 3%, eggs and bajra by 1% each.

In case of manufactured goods, imported edible oil became cheaper by 1% along with the polyester fibre by 2% and newsprint by 1%. During the week, the index of fuel remained unchanged and also there was no movement in the prices of cement and iron and steel.

Inflation Has Risen Rapidly By 441 - June 24, 2008

Surging inflation is expected to dent the hiring prospects in India, the country rated as the most optimistic nation for employment globally, industry experts say. Moreover, any hike in salaries would not be that much beneficial for employees as the increase would largely be eroded by the rising prices of commonly used items, experts say. The wholesale price-based inflation spurted to 11.05 per cent for the week ended June 7. Inflation has risen rapidly by 441 basis points since January 2008.

Double-Digit Inflation A Rarity In India - June 23, 2008

A double-digit inflation rate has been a rarity in Indian economy and it was only in early 1990s and during 1994-95 that inflation hovered above the ten per cent mark, according to the website of Reserve Bank of India.

The RBI website, which gives average monthly inflation figures with the base of 1993-94, tells that the last time inflation was in double digit was in April-May 1995 when it ruled above 11 per cent. The mid 1990s saw a very high inflation and for 12 months in a row from June 1994 till May 1995, the rate of inflation was in double digits.

Prior to that, there was a period when the economy witnessed double digit inflation for a period of 21 months, from November 1990 till July 1992 with a high of 16.3 per cent recorded in September 1991.However, the base year for calculating the inflation numbers at that time was the year 1981-82.The all-time high for inflation was recorded in February and March of 1995 when it hit 16.9 per cent. Given the current inflation rate at 11 per cent, we are still far away from going anywhere near the all-time high levels, an analyst suggested.

The mid 1990s was also the period when inflation went down dramatically . The RBI data suggests that inflation dropped gradually from 11 per cent plus in May of 1995 to 4.5 per cent in February 1996. Subsequently, it was a period of low inflation with only occasional blips. The lowest level was in February 2002 when it was only 1.4 per cent.

RBI Must Take Immediate Steps To Control Runaway Inflation - June 21, 2008

NEW DELHI: Inflation at 11.05 per cent for the week ending June 7 on the wholesale price index is a shock in double digits. A higher than two percentage points rise in the inflation rate will push the government further to the wall than it already is on how to handle the raging fire in the economy.

The stock market reacted sharply, falling by over 500 points to end a dismal week of performance. The current inflation is clearly caused by the global spike in oil prices. Indicators point to the fact that fuel prices led much of this rise. If anything, the food index has gone down by 1 per cent and the non-food index is only marginally higher.

We know that the current inflation is essentially imported. But we have to tackle it the best we can at home. There is a need for stringent demand side and monetary measures. It is time for the Reserve Bank to use all possible tools it has at its disposal to douse the fire. As an immediate step, it may be a good idea for the central bank to let the rupee appreciate a bit.

That would ease import prices of crude as well as some other commodities. An appreciation of the rupee could help in containing inflation also by mopping up some excess liquidity in the system, though it is not a solution without attendant risks.

An appreciated rupee can help bring down landed prices of imported items, thus boosting supply at lower prices. But a more expensive rupee will affect exports. Besides, selling dollars to help the rupee rise is a suggestion that the RBI might argue would lead to other negative effects. Nevertheless, we will have to live with the side effects because controlling inflation must be the central bank’s top priority now.

Along with this, other tools should also be used. Interest rates are effectively negative today, given the rate of inflation.

Tightening money supply is now necessary despite the restraints it might cause in the economy’s growth. Inflation at current levels hurts people, creates economic instability and even political disruption, and is therefore a bigger threat than a slowdown in the pace of growth.

Runaway inflation is an unannounced and painful taxation on people. This time around, it may not be the government’s fault. Indeed, most of it is imported and is hurting economies around the world. But our monetary managers must take urgent domestic action to minimise inflation’s nasty aftereffects . Which means that the RBI will soon have to take some hard decisions.

Lack Of A Trigger With Inflation High

The rains may even hit the Kerala coast a few days earlier than anticipated. The conditions look favourable for monsoon''s earlier onset. Experts believe good rains will be the positive sign to help increase agriculture production, spark demand for auto, FMCG and fertiliser sectors. Mahesh Vyas, MD & CEO, CMIE, said: We have already forecast agriculture growth in our estimate. We expect India to witness GDP growth of over 9 per cent. The primary articles contribute 22 per cent to the wholesale price index and with two-thirds of India''s summer crop dependent on the south-west monsoon, any good news from met department will only help boost industry sentiment.

D-Street running a bit out of steam is also pinning its hopes on the rain gods. Historically, markets have shown positive correlation with normal to above average monsoons. Call it sentiment or just the lack of a trigger with inflation high and industrial production low, the Indian economy could sure do well with a good bout of rain.

Inflation Has Reached Over 8%

NEW DELHI: It seems that rising prices will become a greater worry for government in the coming days than they are being perceived now. The inflation has already reached over 8% since March 2008, though the government's latest data showed on Friday it is hovering around 7.82%.

The provisional figure released by the government revealed an inflation figure of 7.82% for the week ended May 10, 2008. But, according to the revised figure for the week ended March 15, the inflation has already touched 8.02%, which is highest in the last three-and-a-half year.

Chief economist of ICICI Securities A Prasanna said this figure indicates that inflation is around 8% and is likely to go further up if fuel prices are revised upwards. There used to be around 0.2 to 0.5 percentage points difference between the provisional and revised figures. While provisional figures are released after two weeks, revised figures come after two months.

But, since March 1, revised data is 1.5 percentage points higher that the provisional figure. The final figure of inflation for the week ended March 1 was 6.21 as against 5.11 indicated in the provisional figure. In the week ended March 15, the inflation figure is revised upward by 1.34 percentage points to 8.02%.

A senior government official said during this period the provisional figures could not capture price rise of iron ores and steel due to lack of data, which started coming from second week of March, and pushed up revised figures.

However, a senior analyst with a PSU bank said since the provisional inflation figure captured the price rise in minerals and metals since March 2008, the revised figure will continue to be at least half a percentage point higher than the provisional figures. Therefore, if the current inflation according to the provisional data is 7.82%, the revised figure would be in the range of 8.3%.

But any revision of fuel price will put further pressure on inflation. If the petrol price is revised by Rs 2 per litre and that of diesel by Rs 1.50 per litre, the inflation will rise by 0.5 percentage point. This will take the revised figure close to 9%. This will force government and RBI to take tough action to contain inflation, which may hit growth. "We are watching the situation carefully. We will take further measures if needed," FM P Chidambaram said on Friday. At the same time, petroleum secretary M S Srinivasan said that a fuel price hike was "inevitable".

Inflation Is Expected To Come Down To 6 Pc

NEW DELHI: Inflation is expected to come down to 6 per cent from the present level of 7.61 per cent in next three to four months, Prime Minister's Economic Advisory Council Chairman Prof C Rangarajan said here on Monday.

"Inflation is likely to come down to 6 per cent in next three to four months. Thereafter it can come down to 5-5.5 per cent depending upon the monsoon and other sectors," Rangarajan told reporters on the sidelines of a conference.

He also said the high international crude oil prices will also have an impact on the GDP growth rate. However, it will not 'derail' the growth process.

In January, the council has revised the GDP growth estimates to 8-8.5 per cent for 2008-09, he said, adding the government's fiscal measures will also have some impact on the tax collection.

Inflation Rising Further

The average inflation figure for the week ended April 26, 2008, is seen at 7.65 per cent, as compared to 7.57 per cent in the previous week. The figures for the same period of the last year was 6.01 per cent. Inflation has stayed above the 7 per cent mark for the fifth straight week.

Among the financial services firms, BNP expects inflation to be at the upper range of the forecast, at 7.75 per cent. On the other hand, Calyon sees it at the lower end, at 7.51 per cent. Inflation in the week ended April 5, 2008, had eased to 7.14 per cent, but in the following weeks had again began its upward march by rising to 7.33 per cent for the week ended April 12, 2008.

PM optimistic on taming inflation

Prime Minister Manmohan Singh on May 8 promised that the United Progressive Alliance government led by the Congress would tame inflation in the coming months and roll back the inflation rate to reasonable levels.

Dr. Singh was addressing a citizens'' meet, comprising elite sections and important Congress leaders/workers organised by the Karnataka Pradesh Congress Committee.

He said inflation had an international dimension. Oil prices touched an all-time high and food grain and commodity prices rose substantially.

In spite of this adverse scenario, he said the government made strenuous efforts to shield the poor and the vulnerable sections. Kerosene and LPG prices were hardly hiked in four years and even petrol and diesel price rises were kept low. The Centre, he said, was bearing a huge cost on the Exchequer on account of this.

Foodgrain issue prices for BPL rice and wheat were not touched while wheat and rice support prices were doubled. This year, he said, the country had a bumper crop and procurement was excellent.

He said that in spite of inflation, the Centre ensured macro-economic stability and a climate conducive to enterprise and creativity. This had manifested in growth rates averaging almost nine per cent in the last few years benefiting every section and enabled in raising resources for development programmes.

Govt. Has Taken Several Steps To Tame Inflation

Prime Minister Manmohan Singh on May 5 said the government had taken several steps to tame inflation but it would take some time before they bore fruit. He was talking to media persons after the civil investiture ceremony at the Rashtrapati Bhavan.

He pointed to the agriculture situation being "excellent" with a record food production of 227 million tonnes. He wished the new coalition government in Pakistan well and observed that it has begun very well.However, he had no plans to visit that country in the near future. The Prime Minister has been invited to Pakistan by President Pervez Musharraf. Though he had accepted the invitation, no decision had been taken on the visit.

RBI Raised The CRR To Suck Excess Liquidity From Market.

nflation galloped to 42-month high of 7.57 per cent for the week ended April 19 as compared to 7.33 per cent a week ago mainly on account of higher prices of food articles like rice, milk, tea, vegetables and some manufactured products.

The wholesale price based inflation stood at 6.07 per cent in the corresponding week a year ago. The previous high of 7.76 per cent was recorded for the week ended November 2, 2004. During the reporting week, prices of tea shot up by 17 per cent, even as other food items like milk, rice, vegetables and mutton became dearer. Among other commodities, the prices of Light Diesel Oil and furnace oil went up by 2 per cent and by 1 per cent respectively.

In the manufactured products category cast iron pipes jumped by 51 per cent, pig iron by 8 per cent and steel sheets by 2 per cent. The annual rate of inflation, based on Wholesale Price Index (WPI), has been rising despite fiscal and monetary measures taken by the government recently. While the government has banned export of certain commodities like non-basmati rice and pulses and reduced customs duties on various other items to rein in inflation, the Reserve Bank of India (RBI) has raised the Cash Reserve Ratio (CRR) to suck excess liquidity from the market.

Many Steps To Rein In Inflation

With inflation again rising to 7.33 per cent for the week ended April 12, up from 7.14 per cent, the United Progressive Alliance government has once again come under pressure to take some more fiscal and administrative measures to rein in prices.

The rise in inflation could result in the Reserve Bank of India (RBI) further tightening the money supply when it announces the annual monetary policy on April 29. The RBI had already announced a 0.50 per cent hike in Cash Reserve Ratio (mandatory cash deposits of banks), which would suck out Rs. 18,500 crore from the system.

In the Lok Sabha, Union Finance Minister P. Chidambaram said financial, monetary and administrative measures had been initiated to check inflation and more steps would be taken. Inflation rose, despite the high base of 6.34 per cent during this period last year, as global commodity prices continued to rise. It stood at 7.14 per cent the previous week. Among all important food items, the prices of jaggery (gur) surged by 12 per cent, followed by fish marine, sooji, oil cakes, maida, khandsari and coconut oil. However, vegetables turned cheaper, so did imported edible oil, on which the Centre cut duties on March 31.

Inflation Climbs To 7.33% But Price Line Holds Steady

NEW DELHI: Inflation climbed to 7.33% for the week ended April 12, as measured by change in the wholesale price index (WPI) from the level of the WPI for the corresponding week in 2007. This is higher than the previous week’s 7.14%, but lower than the 7.41% peak reached in the week ended March 29.

What is heartening, however, is the price index has hardly budged from the level attained at the end of the previous week, suggesting that the measures initiated by the government to hold the price line have begun to take effect. The change in the WPI from the level attained for the week ended May 5 was just 0.13%.

The index for fuels and manufacturing remained static. While the index for primary articles moved up 0.47% over the week, that for the all-important sub-category of foods moved up a mere 0.04%.

The picture of a virtually-static price index yielding significant levels of inflation on a year-on-year basis has led experts to say the effect of a low base, against which the comparison is being made, is responsible for the high level of inflation this week. Looking at the change over a year, the price index has moved up for all the categories including primary articles (8.17%), manufactured goods (7.16%) and fuel, power, light and lubricants group (6.81%). Experts say the low base effect will continue till October.

“This week, the rise in inflation can be attributed to low base effect to some extent. Last year, during the week ended April 14, 2007, the index fell marginally to 211.4 from 211.5 the previous week. Despite this, WPI rose 0.1%, only the inflation went up to 7.33%,” Crisil chief economist D K Joshi said.

“Last year, from April onwards, the inflation rate had started to decline. While in April 2007, it was ruling at 6%, by end-October 2007, it came down to 3.1%. Thus, it is highly likely that till October, even a small increase in the index during the corresponding week this year will lead to higher inflation. The trend may persist till the year-end,” Axis Bank vice-president Saugata Bhattacharya said.

“It doesn’t mean the fiscal measures taken by the government will not yield result. The better food crop projection indicates that prices may soften. However, high global commodity prices can neutralise the cooling-off effect on prices due to the slew of fiscal measures taken by the government,” he said.

This week, while crude touched the all-time high of $118 per barrel mark, rice prices too continue to remain at higher level of $1,200 per tonne in the international market. However, wheat prices softened to $9 per bushel from $12 a bushel in the backdrop of expected better crop this year.

Despite the fiscal measures that government could have taken to rein in price rise, inflation continues to remain at three-year-high level. It is expected RBI may announce a change in one of its policy rates, the repo rate. These are the rates at which RBI lends (repo) and borrows (reverse repo) from the banks in order to manage the liquidity and maintain the price stability.

The finance minister P Chidambaram on Friday said in Lok Sabha that every measure within the power of the government was being taken and would be taken to calm inflation. “I am confident inflation will moderate over time,” Mr Chidambaram said, adding that it was being largely driven by high international commodity and food prices. Earlier, he said the central bank may introduce more measures in its April 29 monetary policy announcement to contain inflation.

“Though the measures to contain inflation may result in moderation in the economic growth, it is the endeavour of the government to sustain the momentum of high growth with price stability,” he added.

While the government has asked the steel industry to hold the price line, so far no step has been taken regarding containing the iron ore prices, the main input of steel industry that has surged 47.09% over a year.
Prime minister Manmohan Singh on Wednesday said the government will take all possible steps to curb inflation, including increasing the procurement of food grain.

Standard and Poor’s chief economist Subir Gokarn said, “It’s almost three weeks since government started its anti-inflation campaign. However, the inflation continues to maintain its three-high level this week too. Thus, it is highly likely that RBI may go for repo rate hike and it will mean that the growth forecasts may correspondingly go down.”

Higher food and energy cost are stoking inflation across the region. Prices in Singapore jumped the most in 26 years in March, Japan’s rose at the fastest pace in a decade, and inflation in Australia topped 4% for the first time in seven years. Vietnamese consumer prices rose in April at the fastest pace since at least 1992.

On April 17, RBI raised cash reserve ratio to a seven-year high of 8% from 7.5%. The move reduces the supply of money in the financial system by forcing commercial banks to park more money with the central bank.

“At this point, we are talking about a GDP growth rate of 8.1%, assuming no increase in interest rates. However, if interest rates are hiked, I think a more pessimistic forecast may be justifiable, around 8%, or 7.5-8% if they take the range,” Mr Gokarn said.

It is expected RBI may prefer to go for sector-specific measures like raising the margin for collaterised credit to traders in commodities or bring down the tenure of such credit facilities so that further rollover or continuation can be done only after the end-use supervision. Meanwhile, RBI may ease the credit flow to the agricultural sector to boost production which has slowed down.

Some even expressed the possibility of further add-ons in the list of commodities that are barred from trading in the commodities exchange.

“There is no doubt this time that the pressure on prices is the outcome of the supply-side pressures. However, steep rise in prices can be attributed to some extent to futures trading in international market. Futures reflect what people think will happen. Now, as in the past year, the perception that prices of food commodities will continue to rise in the backdrop of strong demand and low supply remained strong, traders hold their deliveries that created shortage and thus led to price rise in spot market,” HDFC bank chief economist Abheek Barua said.

During the week under review the index of primary articles which mainly includes food items and non food industrial inputs went up by 0.5% week-on week. although price lower prices of gram(3%) and barley, arhar, masur, pork and condiments and spices (1% each) declined, the index of mineral group rose by 5.8% as compared to previous week due to higher prices of iron ore (6%) and other minerals (7%). The Y-o-Y rise in iron ore prices went up to 47.09%.

However, the index of manufactured goods includes base metals and alloys steel and iron, cement, remained unchanged week-on week. While the prices index of edible oils went down by 1.6% on week on week basis the index of basic metals and alloys remained consta alnog with of sttl and ioron. However Year on Year rise is significant-edible oils (14.69%) , metals and alloys (20.14%) and steel and iron (34.15%).

Montek Expects Inflation To Come Down

India''s top policy makers say inflation rate could fall substantially in the next two months as the impact of fiscal and monetary measures to tame inflation kicks in. Policy makers also caution that the government can''t be in an over reactive mode and the price trends in the next 2-3 weeks will give a definitive indicator. Montek Singh Ahluwalia, Deputy Chairman, Planning Commission, said that there is nothing alarming and inflation will fall in the next 60 days. Going by last week''s data and taking into account the gestation effect of all measures already taken, Montek says the most worrying phase on inflation may have passed. ''''I am hopeful that reduction in duties will lead to significant imports and thus curbing price rise, which will be evident in some weeks. Data on food grain production too suggests there will be a softening of prices in this area and the impact of monetary measures will roll out in some months,'''' said Ahluwalia.

Inflation Eases To 7.14 Percent

The inflation has eased to 7.14 per cent during the first week of current fiscal, down by 0.27 per cent from the previous week, coinciding with government''s numerous steps in April to tackle surging prices. The wholesale price based inflation came down despite increase in prices of vegetables, pulses, tea, coconut oil and oil cakes. The prices of fruits, gur, cotton seed oil and other edible oils, however, declined during the week ending April 5.

The prices of steel alloys and aviation turbine fuel also increased during the week. The inflation was down because of base effect, as it was quite high at 6.44 per cent in the corresponding week last year. It declined in the first week of the current fiscal after touching the 40-month high of 7.41 per cent for the week ended March 29. The inflation for the week ended February 9 was revised to 4.98 per cent as compared to provision figure of 4.35 per cent.

Inflation Rate Soars To Nine-Month High

New Delhi: The rate of inflation soared to 5.11 per cent for the week ended March 1, the highest in over nine months, mainly owing to a rise in the prices of some food articles, certain manufactured products and aviation turbine fuel. With this, the prospects of a cut in interest rates by the Reserve Bank of India to revitalise the sluggish trend in industrial growth appear bleak.
With the inflation rate based on the wholesale price index (WPI) inching up from 5.02 per cent in the previous week, this is for the second consecutive week that it has remained above the tolerance level of five per cent set by the RBI for the current fiscal.
Expressing concern over the price spiral in the Lok Sabha, Finance Minister P. Chidambaram on Friday attributed the rise to high prices of imported food commodities while noting that the Government was ready for any fiscal measures to rein in inflation even as efforts would be made towards self-sufficiency in these essential items. Inflation is on the rise. It is a matter that causes worry to any Government. When inflation is on the rise, all of us should be concerned, Mr. Chidambaram told members in reply to a question while stressing the point that both global and domestic factors were responsible for the rise in the inflation rate from a low of 3.11 per cent.
Mr. Chidambaram pointed out that contributing to the price spiral were the soaring global prices of certain items which India has to import such as crude oil, palm oil and rice. Since inflation was driven mainly by the prices of four commodities - wheat, rice, edible oil and pulses - the only way of insulating the country from the rise in global rates was to become self-sufficient in these commodities. The Government, he said, had taken certain fiscal steps such as reduction in customs and excise duties to check the prices of such items and noted that it was willing to take monetary and other measures also.

Inflation Rises To 5.02%

Reserve Bank of India (RBI) Governor YV Reddy''s decision to keep interest rates unchanged has once again been vindicated, with inflation rising to a 10-month high. Rising global prices of food and oil have pushed inflation levels back above the 5 per cent mark for the first time since May of last year. Inflation for the week ended February 23 came in at 5.02 per cent compared to 4.89 per cent, the week before. A bulk of the increase came from the primary articles index, which rose to 6.28 per cent versus 4.89 per cent in the previous week. The food index rose 4.8 per cent versus 2.98 per cent the week before.

The unexpected rise in inflation levels above 5 per cent comes due to soaring global food prices. This factor is likely to continue putting pressure on prices over the next weeks. Analysts now expect inflation levels to remain above 5 per cent over the next few months. The rise in inflation came at a time when signs of slowing GDP growth are also intensifying. The government estimates that GDP growth will slip below 9 per cent in the current financial year. Slowing growth in industrial production and weakness in consumer driven sectors drive it. This weakness has led to calls from policy makers and industrialists to lower interest rates to help support the economy''s growth momentum. But with inflation now back up above the RBI''s target of 5 per cent, it seems increasingly unlikely that the RBI would be willing to cut rates anytime soon. Currently, there are acute policy dilemmas arising from global food and energy prices that need to be factored-in in evolving appropriate policy responses, said YV REDDY, Governor, RBI.Even the government accepts that inflation will remain above 5% in the short term. This indicates that high interest rates will continue to be a reality for months to come.