The Hindu Business Line : Primary articles drive up inflation rate marginally

New Delhi, July 6 The annual wholesale price index-based inflation rose 4.13 per cent during the week ended June 23, higher than previous week’s annual increase of 4.03 per cent. The spurt in the year-on-year inflation rate was mainly on account of a rise in some food and mineral prices, data released by the Ministry of Commerce and Industry showed on Friday.

This rise in inflation during the latest reported week follows 10 consecutive weeks of declining inflation. Inflation had fallen by 231 basis points between April 7 and June 16.

Despite the rise, the current inflation is much lower than the level projected by the RBI for the fiscal. The RBI has a target to contain inflation at close to 5 per cent during 2007-08 and bring it down to 4.0-4.5 per cent over the medium-term. The annual inflation rate was 4.84 per cent during the corresponding week of the previous year.

Primary articles

During the latest week, inflation in primary food articles rose by 7.14 per cent, up from a 41-week low of 6.75 per cent during the week ended June 16. The increase was largely driven by higher inflation in foodgrains, fruits and vegetables, eggs, meat and fish, and minerals. Inflation in manufactured products also went up marginally by 5.19 per cent during the latest week, up from 5.13 per cent during the week ended June 16.

Inflation in the fuel group remained unchanged during the latest week after dropping to an eight-year low of a negative 1.35 per cent during week ended June 16. The negative inflation in the fuel group is a result of the high base last year.

The Government had hiked the retail prices of petrol and diesel in June 2006, which were subsequently reduced in February 2007 and March 2007.

The current prices of these products are ruling below their year-ago levels, thereby pulling inflation in the fuel group in the negative zone.

Policy review

Annual WPI inflation peaked at 6.69 per cent in January, its highest levels in more than two years.

The annual rate of 4.03 per cent on June 16 was a 14-month low.

The Finance Minister, Mr P. Chidambaram, had said earlier that policy tightening by the RBI had helped moderate inflation and more rate rises may not be needed if the trend continued.

The central bank left its key lending rate unchanged at 7.75 per cent at a policy review in April.

It raised the lending rate and reserve requirements for banks at the end of March. The RBI’s next policy review is on July 31.

Inflation for the week ended April 28 was revised to 6.01 per cent, as compared to the provisional figure of 5.66 per cent.

This follows a revision of the WPI for the week to 211.6 points, against the provisional estimate of 210.9 points.