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Our Bureau

Mumbai , Aug 29

THE Reserve Bank of India said on Monday that inflation during 2005-06 is likely to be in the range of 5-5.5 per cent, in line with the projection in its Annual Policy Statement.

Underlying inflationary pressures appear to have been contained so far, the RBI said in its annual report for 2004-05. Although headline inflation rose during April 2005, driven up by prices of fruits and vegetables, and some freely-priced items in the fuel group, it edged down subsequently, despite hikes in the prices of electricity, petrol and diesel, the report said.

The annual wholesale price index (WPI) inflation was 3.4 per cent as on August 6, 2005, down from 5.1 per cent as on end-March 2005.

More than one-half of the annual inflation was on account of the fuel group.

However, the pass-through from high international crude oil prices is not complete.

Excluding the fuel group, annual inflation was 1.8 per cent as on August 6, 2005, significantly lower than the headline inflation.

Oil prices in the international markets continue to remain high and volatile.

Headline inflation in 2004-05 eased to 5.1 per cent; this was also in line with the projection in the Annual Policy Statement.

Annual average inflation, measured by annual changes in the WPI, accelerated to 6.4 per cent in 2004-05 from 5.4 per cent a year ago. Headline inflation, measured by year-on-year changes in the WPI, moved in two distinct phases during 2004-05. The first phase covering April-August 2004 witnessed the hardening of domestic prices of coal, petroleum products, iron ore and metals, reflecting lagged adjustments to international prices. The situation was aggravated by the inadequate and uneven South-West monsoon, which began to push up prices of food and non-food agricultural commodities by July 2004.

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