Inflation rises to 5.3%

Costlier manufactured products, mainly cement, iron and steel and edible oils, pushed inflation to 5.3 per cent during the week ended March 5 as against 4.95 per cent in the previous week.

Economists expected inflation to rise further in the coming months. "The level could easily touch 6 per cent despite the government's indications that it will not hike prices of diesel and petrol. It will cross 5.5 per cent if nothing else happens. Without the 8 per cent hike in cement prices seen this week, inflation would have been at 5.2 per cent," said DK Joshi, senior economist, Crisil.

But the government said, if need arose, it would use a combination of monetary and tax policy to keep prices under check.

The government was ready to rationalise excise and import duty structure, ensure effective supply management of sensitive items, and strengthen public distribution system as part of its efforts to check inflation, Minister of State for Finance SS Palanimanickam said in the Lok Sabha today.

After a declining trend since mid-September 2004, inflation has been rising for the past three weeks. Part of the increase can be attributed to the low-base effect of inflation in the March-May 2004 period when the wholesale price index (WPI)-based inflation level dipped below 5 per cent.

On Monday, Chief Economic Advisor Ashok Lahiri had said inflation could fall below 5 per cent by end-March. The inflation level was at 4.79 per cent in the corresponding week last year.