Inflation rises to 4.95%

After remaining on a southward curve for 15 weeks, wholesale price index (WPI) based inflation rose to 4.95 per cent in the week ended 26 February, as against 4.83 per cent (a 9 month low) in the previous week.

"The decline period for inflation is over now. If the international price hikes are passed on to domestic petrol and diesel prices, inflation could touch 6 per cent by March," said DK Joshi, Senior Economist, Crisil.

Adding that international fuel prices were the major worry on the inflation front.

The rise in the inflation level during the week was on account of costlier fuel products and manufactured items including edible oils.

Also, the decline in inflation in the corresponding week last year was responsible for a base effect impact on inflation. After remaining above 6 per cent in January and February 2004, WPI-based inflation had fallen to 5.21 per cent in the corresponding week last year.

Manufacturing inflation has not gone up at 4.2 per cent, but inflation in primary articles is at 1.7 per cent and in primary food is at 3.1 per cent during the week.

Mainly because of high vegetable prices," said Saumitra Chaudhuri, Economic Advisor, ICRA.

Assuming that petroleum prices are not revised further, and that seems unlikely, because international prices are unlikely to come down to around $ 35 a barrel, inflation would be around 5 per cent by the end of the fiscal, he added.

Inflation is expected to rise in March - May 2005, because of the low base effect of last year's inflation. In 2004-05, the government has taken a number of steps, including cutting excise and Customs duties on certain products, raising the cash reserve ratio for banks and allowing additional supply of sugar in the market in order to curb inflation.

The inflation level based on the final index for the week ended 1 January was revised downwards to 5.72 per cent, as against 5.78 per cent reported on the basis of the provisional index.

At the disaggregated level, the index for primary articles fell 0.4 per cent, while that of manufactured products rose 0.1 per cent during the week. The index for the group of fuel, power, light and lubricants rose marginally due to a steep 64 per cent hike in prices of coke.

Within the group of primary articles, the index for the food articles and non-food articles groups fell 0.4 per cent each during the week. Prices of poultry chicked were down 6 per cent, of niger seed down 4 per cent, copra, coir fibre and of ragi, down 3 per cent each.

Vegetable prices fell 2.5 per cent during the week. However, prices of castor seed rose 4 per cent, raw rubber 3 per cent and gingey seed and raw jute prices rose 1 per cent during the week.

The rise in the index for manufactured products was driven by a rise in prices of food products, textiles, paper products, non-metallic mineral products, basic metals and alloys machinery and machine tools and transport equipment and parts.

The indices for rubber and plastic poducts, chemicals and chemical products, however declined during the week.

Prices of rice bran oil rose 13 per cent, of railway sleepers by 12 per cent, cranes by 14 per cent, salt by 8 per cent, rubber chemicals by 6 per cent, imported edible oil by 3 per cent , newspaper by 2 per cent and of broad guage passenger carriages by 4 per cent.

Prices of plastic items however fell 31 per cent and of polystyrene and ayurvedic medicine liquids by 10 per cent during the week.