The Hindu Business Line : Inflation pinches, with a lag; revised nos way above estimates

New Delhi, May 9 Though inflation has not shown any significant spurt during the latest reported week, rising by 7.61 per cent for the week ended April 26 as against 7.57 per cent the previous week, actual inflation estimates could well be much higher.

The consistent upward revisions in the final inflation numbers by the Government since end-January have been fuelling speculation that actual inflation estimates, which come in with a lag, are way above what the provisional figures suggest.

The Commerce and Industry Ministry, which releases the Wholesale Price Index data, has been effecting sharp upward revisions in the final figures since the beginning of this year, with the gap between the provisional and final figures widening to 110 basis points for the week ended March 1 — the latest week where final data has been made available.

The gaps

The final inflation estimate was revised to 6.21 per cent, up from the provisional 5.11 per cent for March 1. The gap between the final and provisional figures has been consistently ruling above 60 basis points since end-January, going by the data.

It was 67 basis points for the week ended February 23, 77 basis points for the week ended February 16, 63 basis points for the week ended February 9, 67 basis points for the week ended February 2 and 67 basis points for the week ended January 26.

During the latest reported week, where provisional inflation data has already hit a near four-year high, analysts predict that the data could be revised upwards when the final estimates come in, going by the trend so far. The Government revises provisional inflation rate after receiving additional price data with a lag of around two months. Since the provisional wholesale inflation data comes out first, it effectively emerges as the most closely followed measure of price trends in the country, while the final numbers, by virtue of being backdated, pretty much go unnoticed.

Going by the final inflation numbers, the Reserve Bank of India’s comfort level of 5 per cent was breached during the week ended February 16, a week before what was provisionally reported. The psychological six per cent mark was breached way back on March 1, as per the final numbers, while the provisional figures had earlier suggested that this mark was crossed only on March 15.

‘MORE STEPS ON THE ANVIL’

Meanwhile, reacting to the latest inflation numbers for the week ended April 26, the Finance Minister, Mr P. Chidambaram, said that inflation inching up from 7.57 per cent to 7.61 per cent was not statistically significant. “In fact, it has come as a big relief that it has stabilised. We are as concerned as everyone else… Every week there is a roll-out of some step or the other. If necessary, more steps will be taken,” he said.

Promising more administrative steps to check the price rise in the economy, Mr Chidambaram said that after having persuaded steel producers to reduce prices and placing a ban on futures trading in four more commodities — gram, soya oil, potato and rubber — the Government was in the process of persuading cement producers to rollback prices. “If we succeed in that (cement), it will be another administrative step. More administrative steps will be taken as and when they become necessary to check inflation,” Mr Chidambaram said.