Average inflation in FY05 was high at 6.22%

Average inflation moved up 103 basis points (1.03%) to 6.22% during 2004-05, the year which also saw upward pressure on interest rates, falling returns on bonds and slower economic growth estimated at 6.9%.

According to provisional figures of the commerce ministry, the average inflation, based on the wholesale price index (WPI), stood at 6.22% in fiscal 2005 as against 5.19% in the previous fiscal.

The final figures may show a "murkier picture" and higher average inflation, analysts said, adding RBI has estimated it to be around 6.5%.

Considering the incessant pressure of global oil prices that ticked near $60 per barrel, analysts expect inflation to be higher had government not restricted domestic oil companies from hiking fuel prices.

Giving break-ups, analysts said inflation stood close to 5% during the first quarter, which rose substantially to near 8% in Q2 and slipped to over 7% in Q3 before finally settling a little over 5% in the fourth quarter in 2004-05.

Bond-dealers said higher prices resulted in negative returns to investors in money market instruments. As inflation hovered at over 7% for most part of the fiscal year, RBI kept its Bank Rate at 6% and commercial banks offered less than 6% return on fixed deposits.