The Hindu Business Line : Costlier fuels, metals drive inflation rate to 7.83%

Index indicator
Current inflation in fuel group ruling at 82-week high.
That in manufactured products group saw 7.75% rise.
FM warns steel, cement firms of possible curbs.

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New Delhi, May 16 The annual Wholesale Price Index-based inflation rose to a 182-week high of 7.83 per cent during the week ended May 3, higher than the previous week’s annual rise of 7.61 per cent.

The sharp spurt in the Government’s latest provisional estimates, mainly on account of higher prices of industrial fuels, metals and some food items, comes despite a series of measures by the Government and the RBI to rein-in spiralling inflationary pressures in the economy.

The week ended May 3 is the thirteenth consecutive week where inflation has been climbing, with inflation moving up by as much as four percentage points over the last four months.

Meanwhile, continuing the trend of sharp upward revisions in actual inflation estimates, the Government has updated the final inflation rate for the week ended March 8 to 7.78 per cent, up 186 basis points from the provisional estimate of 5.92 per cent for that week.

The final inflation figure for the latest reported week is, incidentally, higher than the 7.61 per cent provisional inflation figures released by the Government last Friday (for the week ended April 26).

During the latest reported week ended May 3, the rise in headline inflation was mainly on account of a rise in inflation in the fuel group and in case of manufactured products.

Though the WPI reading for the fuel group remained unchanged during the latest reported week, inflation in this group rose to 7.27 per cent from 6.90 per cent during the previous week on account of the lower base last year. The current inflation in the fuel group is ruling at an 82-week high, with mineral oil prices rising 10.17 per cent on a year-on-year basis while coal prices shot up 9.54 per cent during the latest reported week.

Manufactured Products

Inflation in the Manufactured Products group also rose further to 7.75 per cent after remaining steady at 7.42 per cent in the preceding two weeks.

Inflation in the manufactured products category has risen by 373 basis points ever since December 2007 and the current inflation is the highest since August 14, 2004.

Edible oil prices shot up over 12 per cent on a year-on-year basis during the latest reported week, while iron and steel prices jumped 33 per cent and cement prices increased over 4 per cent.

Inflation in the Primary Articles group, on the other hand, declined a tad to 8.67 per cent, from 8.80 per cent in the preceding week.

Chidambaram warning

Reacting to the latest inflation numbers, the Finance Minister, Mr P. Chidambaram, warned steel and cement manufacturers of more administrative steps if rate cuts announced by them were not enough to check price rise. “We are waiting for steel and cement (prices) reductions to come into force but we always reserve the right to take administrative measures if they are not enough. But for the time being we simply have to remain a little patient,” Mr Chidambaram told reporters on the sidelines of a FICCI function here.

Admitting that the rise in inflation during the week ended May 3 was “indeed worrying”, Mr Chidambaram said the decline in inflation rate in the primary articles group was, however, a silver lining in the clouds.

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