New Delhi, Jul 24 (UNI) The inflation data released here today was further good news for the Manmohan Singh government as inflation rate moved in the reverse direction with the figure of 11.89 per cent for the week ended July 12 as compared to 11.91 per cent forthe previous week.
This was unceasing good news for the UPA government after winning the trust vote on July 22 and stock market giving a thumbs up to its victory yesterday, it was inflation data which showed signs of downturn after almost a secular rise week after week and month and month. The annual inflation rate stood at 4.76 per cent as on July 14, 2007.
The index for 'Primary Articles' group rose by 0.6 per cent; for 'Fuel, Power, Light and Lubricants' group remained unchanged as compared to the previous week, and for the major group 'Manufactured Products', it rose by 0.05 per cent.
The index for 'Food Products' group rose by 0.1 per cent, for the 'Textile' Group declined by 0.1 per cent, 'Basic Alloys and Metal' group rose by a negligible amount and 'Machinery and MachineTools' group was up by 0.2 per cent.
The Finance Ministry, in a statement, said inflation has continued to remain "stable."
It said out of total 98 articles in the 'Primary Article' group, 10 articles have shown a decline in prices as compared to July 5, 2008.
These include fish marine, chillies dry, tea, potatoes, oranges, garlic, cardomom, black pepper, maize and cummin. Another 54 articles have shown no increase in prices.
Just a few weeks ago, when inflation crossed double-digit, the group 'Fuel and Power,' contributed 94 per cent to the inflation rate.
However, in this weeks' data, all the 19 articles in this commodity group have not shown any increase.
In the case of 'Manufactured Products', out of a total of 318 commodities, 299 have shown no increase in the prices over last week.
For nine commodities, there is a decline in prices. These include rice bran oil, cotton seed oil, ground nut oil, imported edible oil, gur, texturised yarn, hessian bags and cloth and liquid vitamins.
Only ten products, particularly lead and zinc ingots, ground nut cake, tyre cord fabrics, and rubber chemicals witnessed an increase in prices.
The annual inflation rate for the group of 30 essential commodities continues to be range-bound.
Prices of essential commodities which include food grains, pulses, edible oils, vegetables, dairy products and some other commodities including kerosene, soap and safety matches have more or less stabilised.
The BSE index moved up yesterday by a whopping 838 points on the government's winning the vote of confidence and amid hope that the Indo-US nuclear deal would come through as also the easing of global crude prices.
However, the market went down by 165 points today; paradoxically on fears that inflation rate will go up compelling the Cental Bank to further suck out liquidity in its review of the Credit Policy next week.
It even discounted renewed activity on the part of Foreign Institutional Investors (FII). Analysts say there was also profit booking in some counters after the hefty rise yesterday.
Reforms seems to be back on the agenda of the government with Left parties off its back.
All said and done, the fact of the matter is that inflation continues to be in the realm of double digit.
But how long it will remain so has become a hazardous activity.
The silver lining has been the reduction in prices of crude oil from 140 dollars plus a barrel to about 125 dollars a barrel.
Galloping world fuel and food prices have resulted in India's high rate of inflation. It is, however, some consolation that most countries in the region have also been seriously adversely effected.
The double-digit inflation has been due to the low base as inflation was less than four per cent until December, 2007 and the laggard effect of both monetary and fiscal policy measures taken recently to moderate inflation.
Reports now say that an emboldened government is thinking of reversing some of these measures, such as relaxing futures trading in certain commodities.
Expected good rabi crop might moderate the inflation rate to some extent from August onwards.
What the Central Bank will do now is as good as anybody's guess.
If it presses the brakes too harsh on monetary policy, then growth will certainly be a casualty and it may be harsh lending for the economy. Since the beginning of 2008, it has already been showing a downward movement.
It is also possible that it could achieve the same results by intervening in the forex market by strengthening the rupee.
This would result in lower import costs and also reduce money supply growth. This will moderate inflation both on the supply and demand side.All in all, a guess on the future inflation rate has become akin to guessing the fate of the government before the vote of confidence. The chances weigh 50:50.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment