Inflation rate finally breaches 12% mark; highest since 1995

New Delhi, Aug 7 (UNI) Inflation rate today scaled an all time high in 13 years with the figure being at 12.01 per cent for the week ended July 26, as the index for the two major groups 'Primary Articles' and 'Manufactured Products' going up by 0.1 per cent each.The index for the groups which showed an increase are: 'Food Articles' (0.1%), 'Non-Food Articles' (0.4%), 'Fuel, Power, Light and Lubricants' (0.2%), 'Food Products' (0.1%), 'Textiles' (0.4%), 'Paper and Paper Products' (0.2%), 'Non-Metallic Mineral Products' (marginal increase) and Machinery and Machinery Tools (0.1%).

Only two group showed a decline in the index. These are 'Minerals' (0.6%) and 'Chemical and Chemical Products' (0.5%).The Wholesale Price Index (WPI) for the previous week stood at 11.98 per cent, but data released by Commerce and Industry Ministry today showed that inflation rate has finally breached the barrier of 12 per cent--the highest since 1995.

The rate of inflation a year ago in the same month stood at 4.7 per cent.

The Finance Ministry, however, said inflation, on a week-on-week basis has continued to remain stable.

It said the annual inflation rate for the group of 30 essential commodities at 6.66 per cent was marginally lower than the inflation of 6.67 per cent recorded in previous week.

The Ministry said annual inflation of these commodities has continued to be range bound between 5.7 to 6.7 per cent in 17 weeks of the current fiscal year.

The Ministry said 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.

For the past few weeks, inflation rate has moved in the region of 11 per cent plus, but did not touch the 12 per cent mark.

Inflation rate is now the highest since 1995.

Inflation data, however, dashed hopes of the corporates that the Reserve Bank of India (RBI) will relax its monetary policy stance of high interest rates, following easing of global crude prices from more than 140 dollars a barrel some times back to about 120 dollars a barrel now.

The stock markets too were nervous for the past few days on fears that inflation data would be disappointing, notwithstanding the fact the BSE Sensex moved up 112 points yesterday and 43.71 points today.There were signs of nervous selling.

The annual rate of inflation, calculated on a point to point basis for 'Primary Articles' stood at 10.32 per cent for the week ended July 26 as compared to 10.47 per cent on July 28, 2007.
The inflation rate for 'Food Articles' stood at 5.78 per cent as compared to 9.74 per cent a year ago.

The Finance Ministry said out of a total of 318 commodities in the 'Manufactured Products' group, 299 have shown no increase in prices over last week.

In the case of four commodities there is a decline in prices. These include cottonseed oil, groundnut oil, resins and acids of all kinds.

However, 15 commodities in the group showed a hike. These are cotton and woolen yarn, woollen cloth, groundnut cake, white printing paper, ball bearings, caustic soda, cement, newsprint and sugar.

Out of a total of 98 articles in 'Primary Article' group, 18 articles have shown a decline in prices. These include arhar, gram, barley, wheat, rice, bajra, urad, fresh coconut, cardamoms, groundnut seed and iron ore.

The Ministry said another 53 articles have shown no increase in prices.
Prices of 18 articles, out of a total of 19, in the commodity group 'Fuel and Power' have not shown any increase.

The Indian authorities grappling with the monster of inflation can draw some comfort from the fact that the bug of inflation has bitten entire Asia.

Surging energy and commodity prices are fuelling inflation across the region.

Consumer prices in the Philippines rose 12.2 per cent in July from a year ago, the fastest growth in 16 years.

Taiwan's inflation rate stood at 5.92 per cent in July, the highest in 14 years.
The Bank of Korea today raised its benchmark interest rate to its steepest in the eight years, to combat inflation, the highest in a decade.

Thus, India's Central Bank is not lone in repeatedly raising the benchmart lending rate-the repo--and Cash Reserve Ratio(CRR) to put a squeeze on consumer spending.

But the Indian policy makers are now telling the public that prices will cool down by March 2009. The first call in this regard was that of RBI Governor Y V Reddy and today Planning Commission Deputy Chairman Montek Singh Ahluwalia made a similar statement.

The year 2008 will not only go down in history as the year of the Beijing Olympics, but also of a significant slowdown in almost all the Asian economies.

The big four Asian tigers-- Hong Kong, Korea, Taipei and Singapore--are expected to experience harsh lending where GDP growth would slump.

After many years, China too will be in the single digit zone of growth rate, after surprising the world for many years with sustained double-digit GDP growth.The queer fact, however, about India is that the ruling coalition may have to pay a price for low growth and high prices , faced as itis with elections to some State assemblies later this year and aGeneral Election next year.