Inflation rate soars to nine-month high - 16th March 2008

The rate of inflation soared to 5.11 per cent for the week ended March 1, the highest in over nine months, mainly owing to a rise in the prices of some food articles, certain manufactured products and aviation turbine fuel. With this, the prospects of a cut in interest rates by the Reserve Bank of India to revitalise the sluggish trend in industrial growth appear bleak.

With the inflation rate based on the wholesale price index (WPI) inching up from 5.02 per cent in the previous week, this is for the second consecutive week that it has remained above the "tolerance level" of five per cent set by the RBI for the current fiscal.

Expressing concern over the price spiral in the Lok Sabha, Finance Minister P. Chidambaram on Friday attributed the rise to high prices of imported food commodities while noting that the Government was ready for any fiscal measures to rein in inflation even as efforts would be made towards self-sufficiency in these essential items. Inflation is on the rise. It is a matter that causes worry to any Government. When inflation is on the rise, all of us should be concerned, Mr. Chidambaram told members in reply to a question while stressing the point that both global and domestic factors were responsible for the rise in the inflation rate from a low of 3.11 per cent.

Mr. Chidambaram pointed out that contributing to the price spiral were the soaring global prices of certain items which India has to import such as crude oil, palm oil and rice. Since inflation was driven mainly by the prices of four commodities - wheat, rice, edible oil and pulses - the only way of insulating the country from the rise in global rates was to become self-sufficient in these commodities. The Government, he said, had taken certain fiscal steps such as reduction in customs and excise duties to check the prices of such items and noted that it was willing to take monetary and other measures also. "We are ready to take any fiscal step to keep inflation under check," he said. One such effective measure, he said, was the interest rate and the RBI should be trusted to use it as an instrument to bring about price stability.