Inflation hits 3-yr high, at 7 per cent | Sensex loses 480 pts

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New Delhi: Inflation for the week ended March 22 stands at 7 per cent versus 6.68 per cent. The market had estimated it at 6.52 per cent.

Inflation galloped on higher prices of food, vegetables, minerals and manufactured items, even as measures to tame prices are expected to take effect only in 2-3 weeks.

The vegetable prices are up 4.9 per cent for the week ended March 22, while the primary articles WPI (Wholesale Price Index) is 1.8 per cent for the same week end. The minerals WPI is up 38.2 per cent, while the metallic minerals WPI is up 42.8 per cent for the week-ended March 22.

Talking about inflation Union Minister for Agriculture Sharad Pawar said, “Government taking several measures to check this and these thing takes time. Global factors also responsible for it.”

ICICI Bank MD & CEO K V Kamath said, “All I can say is liquidity is comfortable, whatever we will do we have that in context, liquidity is comfortable, Indian industries need to grow, we have inflationary challenge. We need to balance these 4-5 elements, sure we will do it in a manner that is appropriate.”

Earlier, the Government decided to abolish import duty on crude form of edible oils, cut rate on refined edible oils and ban non-basmati rice exports among other measures to ease the pressure off prices.

“Countries around the world are facing inflation. China's inflation is much higher than other countries. Government has done whatever it could to control inflation. Policy prescription on the fiscal side can be taken and the Government has taken those steps. Monetary policy cannot address inflation. If there are more taxes, then the Government should cut them,” economist Surjit Bhalla said.

“Government has taken steps to control inflation. I am m sure it will have an effect. They have banned export of imp goods. Wholesale consumer price index might reduce. Also it has to be a co-op effort between the state government and the Centre,” Congress leader Jayanti Natarajan said.

The high rate of inflation could also prompt RBI to take monetary measures, like hike in interest rate or tighten money supply through hike in CRR.

In the manufactured items category, sunflower oil, vanaspati, butter, mustard oil, sugar and groundnut oil became expensive, while prices of ghee, coconut oil mellowed down by 1 per cent each.

At the same time, prices of steel ingots, alloy steel casting were higher. However, car chassis moved down by one per cent.

With the climbing inflation rate, there is a possibility of Government bringing back price ceilings on commodities.

According to media reports the finance ministry has recently asked the Cabinet committee on prices to issue a notification authorising ministries to invoke Section 18G of the industrial development and Regulation Act 1951.

This act allows Government to impose price controls on items like cement and steel. The act has not been used since 1970s.

(With agency inputs)

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