Inflation soars to a 42-month high of 7.57%

Despite of Government’s hardening efforts and several measures to rein spiralling inflation; the rate still continues to go high. The Wholesale Price Index (WPI) has reported in its inflation data for the ended week of April 19 to touch a 42-month high mark of 7.57 %. The main factors behind this new height of inflation is surging prices of vegetables, food articles, milk, tea, meat, certain manufactured items, including steel, and some fuel products.

This inflation rate has risen to 24 basis points from last week’s data report that was at 7.33%. However, government and Reserve Bank of India have taken some hard decision to curb inflation.

Finance Minister at a meeting in Bangalore has appealed to people to have patience and assure that the inflation rate would be tamed soon and the prices of food grains and products would decline sooner than other commodities. He was speaking in a seminar organised by Federation of Karnataka Chambers of Commerce & Industry on Friday.

Speaking on the same topic, the Agricultural Minister who is also Minister of Consumer Affairs, Food and Public Distribution, said in a released statement that government agencies have crossed the stock limit of 150 lakh tonne by procuring 154.2 lakh tonne by May 01 as against last year’s procurement of 82.4 lakh tonne on the same day.

Describing about the major reason of soaring inflation, WPI stats shows that the rising prices in vegetables by 0.3%, tea by 17%, mutton by two percent, cast iron spun pipes rocketed by 51%, basic pig and foundry iron by eight per cent and iron sheets and plates rate hiked by two per cent are the major reason behind three and half years’ high record inflation.

However, the retail steel prices in the domestic open market have slid by 16-19% due to government’s effort of containing price rise. “The steel industry’s cooperation is essential in containing prices.” said Union steel secretary RS Pandey.

While for taming spiralling prices of Cement, the Commerce and Industry Minister Kamal Nath has called a meeting in the second week of May with cement companies.

“Cement prices have gone up by 4.4% over the whole year. This is a matter of concern. The cement industry has been citing the increase in prices of coal, transportation and fuel as the reason for the price increase. As a pre-emptive step, we have made cement imports duty-free and we are looking at more imports from Thailand and Pakistan,” said Commerce Minister.

For taming the spiralling price rise, Finance Minister has scrap the import duty on edible prices, food products, pulses, barred the export of non-basmati rice and pulled off incentive on export over Basmati rice. Commerce Ministry has also banned the cement export and scarped the export incentive over steel. Government has also taken fiscal step to tame the surging prices of petrol and diesel. Agriculture Minister Sharad Pawar has ordered to record procurement of wheat, which was main headache of the government going beyond the range of common public.

Besides government, RBI has also hiked the Cash Reserve Ratio by 50 basis point in two steps in quick succession, first 0.25% hike effective from April 26 while the second step of CRR hike would be effective from May 24, as per RBI stated in the statement while presenting the new credit policy on April 29, 2008.

On the other hand, the opposition parties led by BJP and UPA allies led by left parties have criticised the government for failing to control the skyrocketing prices of foods and very essential commodities.

“Despite the tall claims made by Union Finance Minister P. Chidambaram and the government about the fiscal and monetary measures taken, this is what was actually happening. It is evident that the steps taken by the government are totally inadequate and meaningless,” CPI’s Central Secretariat said in a statement.