Inflation at -1.58 percent but prices still rise

As per latest official data, annual inflation based on Wholesale Price Index stood at - 1.58% for the week ended July 25, 2009, while it was at 12.53% a year ago. The latest inflation number shows a steeper fall in annual inflation recorded at the end of the previous week at -1.54%.

Government data showed on Thursday that price level for all commodities stayed below zero for the eighth straight week, but prices of

food items continued to surge, signaling political trouble for the Centre and three states preparing for local elections in a few months. Maharashtra is facing assembly polls in October-November, while Haryana that is supposed to go to the polls next year is likely to advance it to this year-end. Jharkhand, now under the President’s rule, is also likely to go to polls later this year.

inflation updates - Annual inflation at 0.61 percent

(28/5/09 - Inflation updates) - The wholesale price index rose 0.61 percent in the 12 months to May 16, matching the previous week's annual rise, government data showed today.

It was below a median forecast of 0.74 percent in a Reuters poll of analysts. The annual inflation rate was 8.66 percent during the corresponding week of the previous year.

It may be noted that The wholesale price index is more closely watched than the consumer price index, which is published monthly, because it covers a higher number of products and is released weekly.

Govt taking steps to tame inflation - Finance Ministry

The federal government is taking steps to tame inflation that was mainly driven by high commodity prices, a finance ministry statement said on Tuesday.India's wholesale price index rose to 13-year high of 11.42 per cent in mid-June, after the government raised retail fuel prices by 10 per cent last month. "Though this is the highest inflation in the last 13 years, it is largely commodity centric. Government is taking measures to moderate the inflationary pressure," the statement said, without specifying.

Reeling out data, the ministry said around 60 per cent of the increase in the prices of primary articles was accounted for by five commodities - iron ore, cotton, milk, fish and oranges. Even in the manufacturing sector, nearly 60 per cent of the increase was accounted for by eight products, six of which belong to the category of iron and steel products.

Last month, the central bank raised its key lending rate twice, first by 25 basis points and again by 50 basis points, to rein in inflation

"India's Biggest challenge is inflation " - P.Chitambaram

Finance Minister P Chidambaram considers inflation the country's biggest challenge today and regards becoming an open market as the way forward. Expressing concern at "the relentless rise" of crude oil, commodity and food prices, he put partial blame for the rising food prices on the "foolish" diversion of food to fuel. But he did not name the US, where food crops like corn are used for making ethanol. "Food prices have also been on the rise thanks to foolish diversion of food to fuel," he said, appearing on an hour-long special about India's business and economy - "India Rising: The New Empire" - on CNBC Sunday night.

Chidambaram also did not think that recent acts of terrorist violence would affect the investment climate in India. "Please remember, terrorist violence has affected bigger cities like London, Madrid, Tokyo, New York," he told the show host Erin Burnett discussing India's economic challenges. "If terrorist violence, terrorist action affects any city in India, it concerns all of us but that does not mean that investment has been jeopardised or is in peril," Chidambaram said. "India's biggest challenge now is inflation." India is building thousands of kilometres of roads, power plants, refineries and sea ports, he said referring to investment in infrastructure. "But surely the way forward is to become an open market."

Commerce and Industry Minister Kamal Nath, too, viewed infrastructure as "also a big challenge for us to keep pace with our growth." Infrastructure is just not roads, ports and airports, but also rural roads, which connect villages, drinking water, health and access to medical facilities. Envisaging large investment in infrastructure over the next five years, he said: "It is happening. We have to have huge investments in energy sector, ports.

So that's all happening, that's on the anvil." Asked how long controls on foreign investment would stay, Kamal Nath noted that retail is one of the very few sectors which are not open. "Rest are all absolutely open and we are taking in investments." Obviously because of liberalisation, foreign direct investment (FDI) had grown from $2.2 billion four years ago to 25 billion this year, he said. Asked if India could remain self-sufficient in food in view of its growing population, Kamal Nath said: "We have been self-sufficient except in edible oil and lentils, which are imported. And unless we have a monsoon failure, we don't see a problem even with these growing numbers."

Comparing India and China, the minister said: "We call ourselves the fastest growing free market economy. And there are differences in governance too." And while India's growth story is domestic market-driven, China's growth story is export market-driven. "But China has its own genius, we have our own genius," Kamal Nath said noting the two countries have good relations even as they compete with each other. Besides India's growth story, the CNBC special also featured a look at Tata Motors and the world's cheapest car, Indian movies, the world of call centres and Burnett practicing cricket with a team in India.

The programme also took a look at India's growing upper class, including the 60-storey house being built in Mumbai by the country's wealthiest man, Mukesh Ambani. And in stark contrast, it also took a quick glance at millions of India's homeless and others living in the world's biggest slum at Dharavi.

- Economic times

June 13 - Inflation soars to 8.75% on rising prices

Surging food and fuel prices further pushed up inflation to 8.75 per cent for the week ended May 31 from 8.24 per cent in the previous week, its highest in 7 years. Inflation may go beyond a 13-year high of 9 per cent as a result of the steepest-ever hike in petroleum prices, analysts said. "It (inflation) could cross 9 per cent in the near term owing to the hike in petrol and diesel prices," HDFC Bank chief economist Abheek Barua told reporters recently.

In a bid to curb inflation, the Reserve Bank India on Wednesday hiked the repo rate — the rate at which banks borrow from RBI — by a quarter point, from 7.75 per cent to 8 per cent, giving a clear signal that for it inflation is a bigger priority than growth. It may not tame inflation in a hurry, but will discourage spending over a period of time, as banks pass on their higher cost of funds to borrowers. But all is not over yet.

For, a slim majority of economists now expect the RBI to raise its key lending rate once more in 2008 after this week’ssurprise 25 basis point increase to contain inflation expectations, a media poll has showed. Many also expect the RBI to raise its cash reserve ratio (CRR), the main policy instrument used over the past 18 months, by 25 to 100 basis points in coming months to clamp down on inflation-stoking surplus cash.

The government, under pressure to contain prices ahead of state polls this year and national elections due by next year, has also cut import duties on edible oil, curbed rice exports and forced steel and cement companies to cut prices.

Inflation to soar further, likely to touch 7.5 % mark

ASSOCHAM on Saturday predicted that it would continue to soar for next three to four months, and may even touch the 7.5 per cent mark.

"The Wholesale Price Index (WPI) based inflation rate which is already at the highest in the last three years, could even surpass the 7.5 percent mark," predicts ASSOCHAM President Venugopal Dhoot.

In order to check inflation, the Cabinet Committee on Prices (CCP) chaired by Prime Minister Manmohan Singh on Monday, decided to abolish import duty on all crude edible oils, including palm and soya, and banned the export of non-basmati rice and pulses to contain inflation.

The Central Government also decided to raise the Minimum Export Price of basmati rice to 1,200 dollars per ton from 1100 dollars, to balance the demand " supply in the domestic market and to cut import duty on butter and clarified butter (ghee) from 40 per cent to 30 per cent, besides, the 15 per cent import duty on maize was abolished, applicable on import of up to five lakh tons.

The CCP also advised states to impose limits on stocks of commodities under the Essential Commodities Act, besides asking steel producers not to raise prices.

The study done by the business conglomerate also reveals that the Central Government's efforts to contain inflation will come start-yielding results by August when inflation is likely to fall at of four per cent.

Experts believe that after all possible measures taken by the government, now, everyone is waiting for Reserve Bank of India's (RBI) annual credit policy that will be revealed on April 29.

The industry body has asked the RBI to increase the interest rates, specifically the Cash Reserve Ratio (CRR) to restrain liquidity.

The problem of inflation doesn't seem to be India-centric with China too struggling with a rising inflation rate of over nine percent.

According to analysts, the announcement of Sixth Pay Commission recommendations, and provisions for enhanced expenditure on social sectors in the Budget 2008-09 coupled with rising crude oil prices have also raised expectations about high inflation.