Inflation at 11-month high
In a sudden spurt, which an economist described as a “nasty surprise”, the annual inflation rate jumped to an 11-month high of 5.92 per cent for the week-ended March 8, setting off alarm bells and prompting expectations of swift fiscal policy measures to contain the price rise.
The annual inflation rate, based on the wholesale price index (WPI), rose to this new level from 5.11 per cent for the week ended March 1 and 5.02 per cent in the week before that. Inflation had risen to 6.51 per cent in the same period last year.
The latest spurt has been driven by an across-the-board increase in prices of food articles, fuels and manufactured products. But a sharp rise in basic metals has led the rise.
The index for the “basic metals, alloys and metal products” group in the manufactured products component, with a weight of 63.75 per cent in the WPI, rose 6.7 per cent to 267.5 from 250.7 for the previous week on account of higher prices of blooms, billets and slabs, wire and bars among others.
DK Joshi, principal economist, Crisil, said inflation was much above anticipated levels.
“The Reserve Bank of India and the Finance Ministry will have to get into action. Any easing of monetary policy is now unlikely. I expect the government to take fiscal measures to moderate inflation including reduce excise duties and allowing cheaper imports,” he said.
“This is a nasty surprise and way off our projections. Commodity prices are going up globally as investors in markets like the United States are now moving to alternative assets like investible commodities. This partly explains the recent spurt,” said Saugata Bhattacharya, vice-president, Axis Bank.
Despite the present spurt, Bhattacharya foresees inflation softening over the next couple of months.
“We had earlier projected an inflation rate of 5.4 per cent for August this year. We revise it by around 20 basis points,” he said
