The Hindu Business Line : Inflation surges to 40-month high

New Delhi, April 11 With no let-up in prices of vegetables, milk, edible oils, fuels and iron and steel, inflation spiked sharply to its highest levels since November 2004, even as fresh industrial production data reflected signs of a pick-up in output.

The easing of concerns about the extent of a slowdown in the broader economy, amid the sustained upward spiral in price levels, increases the odds that the RBI might opt to tighten monetary policy when it holds a review at the end of the month, analysts point out.

The annual Wholesale Price Index-based inflation rose 7.41 per cent during the week up to March 29, up sharply from the previous week’s 7 per cent rise. During the latest week, wholesale prices in the iron and steel category were up a whopping 34 per cent on a year-on-year basis, while edible oil prices shot up 20 per cent.

Among essential items, cereal prices jumped 7 per cent, vegetables were up 16 per cent, while prices of both milk and spices spurted 8 per cent in the wholesale markets. Dairy products were up 9 per cent, while cement prices jumped 5 per cent. In the fuels category, both mineral oil and coal prices were up 9 per cent.

Meanwhile, industrial production grew 8.6 per cent this February from a year earlier, higher than January’s upwardly revised 5.8 per cent rise, according to IIP data released on Friday. This, however, was lower than the 11 per cent recorded during the same month a year ago.

During the month, manufacturing clocked an 8.6-per cent growth, electricity generation was up 9.8 per cent while mining output was up 7.5 per cent.

The strongest growth was in consumer non-durables, including items such as toothpaste and soaps, which rose 11 per cent from February a year ago, while momentum in the capital goods segment picked up, with a 10.4 per cent rise in output after January’s dismal 2.1 per cent (pre-revised). Consumer durables recorded a 3.3 per cent growth.

Ban on exports

Adding to the series of measures already in place to curb rising prices, the Government on Friday announced a ban on cement exports, besides withdrawing export incentives for rice and primary steel items in its new Foreign Trade Policy. The Government has already banned export of non-basmati rice, edible oils and pulses in an attempt to curb inflation.

The Cabinet Committee on Prices is now slated to consider a fresh set of proposals next week, including a ban on steel exports.

The Cabinet panel is also likely to consider proposals like a cut in excise duty on finished steel and scrapping customs duty on imported steel.

‘Global phenomenon’

Responding to the latest inflation numbers, the Centre termed soaring prices as a global phenomenon and said it was taking all possible steps to contain the rise. “The Government has no magic wand to bring down inflation. Due to a rise in prices worldwide, it has become an imported inflation,” the Minister for Science and Technology, Mr Kapil Sibal, said while briefing the mediapersons after a Cabinet meeting here.