Inflation touches 8.1% in the week ended 17th May 2008

Inflation touches 8.1% in the week ended 17th May 2008

Inflation
as measured by change in Index of Whole Sale Price Index (WPI) touched
8.1% in the week ended 17 May 2008, up from 7.82% in the previous week
ended 10th May 2008.

Primary articles
Index of primary
articles recorded 0.5% growth during 17 May 2008 compared with last
week. Index attained the level of 240.9 during 17 May 2008.In this
major group, index of food articles recorded 0.6% growth compared with
last week, index attained the level of 232.9 during the week ended 17
May 2008 compared with 231.4 last week. On food articles recorded 0.2%
growth during the week ended 17 May 2008 compared with last week. Index
attained the level of 230.3 during 17 May 2008 against 228.9 last week.

Fuel, power index
The
index for this major group recorded 0.4% growth to 347.2 during 17 May
2008 compared with last weeks 345.8. Higher prices of coke
(31%),furuace oil ( 3%), naphtha (2%) are the major drivers for the
growth during the week ended 17 May 2008

Manufactured products
The
index for this major group recorded 0.1% growth to 199.4 during the
week ended 17 May 2008.The index for the food products recorded 0.4%
growth compared with last week, rice bran oil recorded 9% growth,
malted food recorded 3% growth during the week time.

Textile
index recorded 0.5% to 129.4 during the week ended 17 May 2008 followed
by wood and wood product index 8.7% growth to 237 compared with 218
last week. Rubber product index recorded 0.2% growth and chemical and
group recorded 0.05% increased during the week ended 17 May 2008.

Outlook
Higher
inflation adding stress on economy however at the same time higher GDP
numbers are providing room for RBI to take aggressive call on inflation.

Today
CSO release GDP numbers for Q4 of 2007-08 along with full year numbers,
which are above the expectations.GDP, recorded 9% growth for the year
2007-08 compared with 9.6% and 9.4% in 2006-07 and 2005-06.

The
spike in crude oil prices is forcing the government to accept for some
hike in petrol and diesel prices. Though no decision has sofar been
taken, it can happen any time now. Currently, RBI has room to increase
interest rates, as the economic growth is quite good, and it can afford
to tinker with interest rates to cool down inflation. Nevertheless, as
fuel have high weightage in whole sale price index, it may be wise to
wait for the impact of fuel price hike on inflation, and then take
appropriate monetary measures.
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