The provisional wholesale price index-based annual inflation rate rose to 11.89 per cent for the week ended June 28, driven mainly by an increase in prices of fruit and vegetables, pulses, edible oils, textiles, fertilisers and chemical products.
"There is upward pressure on the index itself. The second round impact of the recent fuel price increase effective from June 5 is pushing prices of food items up. This is not only the base effect at work. I expect inflation to average 10 per cent this year," said Dharmakirti Joshi, principal economist, Crisil."Everywhere you look the industrial growth numbers, capital goods, electricity, mining etc everything is down. But when you look at inflation, everything is going up," said Joshua Felman, resident representative, International Monetary Fund. "More than the inflation numbers, it is how widespread the price rise really is. There is no doubt the economy has slowed, but the bigger worry is inflation. Earlier it was being imported, but what we are seeing is the second round impact as companies pass on rising costs to consumers," Felman added. Rising food prices are a politically sensitive matter for a government battling the price rise through calibrated fiscal and administrative measures ahead of general elections slated in early 2009. Barclays Capital Research said WPI inflation could hit 17 per cent by September 2008. Shubhashis Gangopadhyay, advisor to Finance Minister P Chidambaram, told reporters that inflation would stay in the double digits until December, adding that he expected economic growth to slow slightly in 2008-09. "We are trying to cope with the impact of high oil prices and inflation. Steps already taken by the central bank would help tame inflation," he added.
The Business standard dt. 12 7 2008
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