Inflation inches to 5.26 per cent

Rising prices across the board caused inflation to rise to 5.26 per cent in the week ended April 2, 2005. Inflation, based on the wholesale price index (WPI), a measure of the rise in prices in the economy, went up from 5.05 per cent recorded in the previous week.

In the medium-term, however, inflation will remain subdued because of the high base effect.

"During this period in 2004-05, inflation had started rising and had gone up to 8 per cent by August. The base effect alone would ensure that the inflationary scenario remains benign," said DK Joshi, senior economist, Crisil.

The government has, however, not yet taken a decision on hiking the prices of petrol and diesel.

If the rise in international oil prices is passed on to Indian customers, a 10 per cent hike in the prices of all petroleum products (corresponding to an international price of around $45-46 a barrel) will lead to a 1 percentage point rise in inflation, said experts.

They added that the failure to pass on the price hike meant that the margins of oil marketing companies were being eroded.

"If it were not for the profit-sharing, being done by ONGC and Gail, the four marketing companies would have reported losses in 2004-05," said a petroleum sector analyst.

Inflation was substantially higher than 4.51 per cent in the corresponding week last year. The WPI-based inflation, based on the final index for the week ended February 18, was revised downwards to 4.96 per cent from 5.01 per cent reported earlier on the basis of the provisional index.

At the disaggregated level, the index for primary articles rose 0.4 per cent while that for manufactured products rose by 0.2 per cent during the week.

A steep 20 per cent rise in the prices of aviation turbine fuel, 17 per cent hike in naptha prices and 1 per cent increase in furnace oil prices "" all items with unregulated prices "" pushed up the index of the group of fuels, power, light and lubricants by 0.1 per cent during the week.

"Inflation in primary articles was at 1.4 per cent. Manufacturing inflation has been oscillating around 5 per cent and the inflation level for fuels is at 10.1 per cent, mainly because some items in the group are linked to international prices," said Joshi.

Within the index for primary articles, the index for food articles rose 0.6 per cent on account of a steep 9 per cent hike in poultry chicken prices, 5 per cent rise in vegetable prices and a 3 per cent rise in ragi prices during the week.

The index for non-food articles fell 0.1 per cent owing to a 7 per cent drop in copra prices, 5 per cent dip in linseed prices and a 3 per cent fall in the prices of castor seed. The overall index for oilseeds fell 0.5 per cent during the week.

The index for the major group of manufactured products rose 0.2 per cent, driven by a rise in the indices for all the major heads. The index for rubber and plastic products rose 1.3 per cent owing to a steep 62 per cent hike in the prices of plastic items.

The index for the sub-group of chemicals and chemical products rose 0.3 pre cent during the week, mainly because of a 10 per cent hike in the prices of soda ash, 5 per cent hike in the prices of caustic soda and 2 per cent hike in the prices of synthetic rubber.

Other items whose prices rose sharply during the week included rice bran oil, nuts and bolts and electrodes (up 4 per cent), pan masala and black and white TV sets (up 3 per cent).