Editorial: Some relief

There was a general expectation that the inflation rate for the week ending April 5 would be a little lower than the previous week's shocker of 7.41 per cent. The wholesale price index (WPI) numbers released yesterday met these expectations, coming in at 7.14 per cent higher than a year ago. That is still well above the danger mark, but provides reassuring signs of a reversal. These are the first numbers reflecting the possible impact of the measures that the government took in the first week of April and therefore provide an early test of their effectiveness. Specific evidence that the measures may be having an impact comes from the prices of edible oils, for which the import duty rates were cut. Only the price of coconut oil increased over the previous week. Rice bran oil and cottonseed oil, two products with relatively high substitutability, saw price declines of 6 per cent over the previous week, while mustard and groundnut oils declined by 2 per cent. The threat of increased competition from imports apparently had a salutary effect on domestic pricing. Of course, duty reductions, particularly if the duty rate is brought down to zero, are only a limited measure which will not offset persistent price increases in global markets. Since this is the current scenario, the government cannot rest on its laurels and must look for other ways to buffer the poorer households against these increases.

From the overall perspective on food prices, the price of tea went up sharply by 4 per cent over the previous week, while there were significant increases in important pulses like moong and urad. While the domestic price of rice is still showing relatively moderate increases, the global situation for this staple is visibly deteriorating. In this context, the Met has released its advance forecast for the upcoming south-west monsoon, indicating that it would be normal for the country as a whole. Another global forecast has also indicated that rainfall would be normal during June and July and only mildly deficient in August and September, which bodes reasonably well for the kharif harvest. Domestic rice prices should soften appreciably in anticipation of a good harvest later in the year. Good monsoons will also ease the pressure on several major oilseeds and pulses like tur. Therefore, while the global situation remains threatening, a combination of good policy and good luck can buy some time for India. The cautionary warning is that the advance monsoon forecast is yet to be proven very precise, so the danger that the domestic scenario will mirror the global one is still real.

The other big contributors to the recent inflationary surge "" metals, particularly iron and steel "" show no signs of letting up. Global prices are elevated and the moral suasion that the government is using to get producers to ease up on prices does not seem to be working. Of course, the political significance of steel prices is far less than that of food prices, so the inability to deal with them will not reflect so badly on the government. Meanwhile, as the Reserve Bank of India goes about readying its annual policy statement, scheduled for April 29, the latest inflation numbers do not show enough of a change to prompt anything less than a strong anti-inflationary stance.