Today's data was accompanied by a massive, and perhaps unprecedented, 110 basis points revision to the provisional inflation rate for the week ended March 1, 2008. The final inflation rate for the week is 6.21 per cent, as against 5.11 per cent reported earlier. This is the largest revision in recent months and once again underscores concerns over the data. Recently, the industry department proposed to improve the quality of the data and make its release a monthly affair, instead of the weekly system followed now.
Specifically, the 110 bps revision is being attributed to a two-month lag in updating iron ore prices in the index. "Such revisions may continue for another month or so," said Dharmakirti Joshi, principal economist, Crisil.
On the whole, the outlook for inflation continues to be grim. Economists say spiraling crude oil prices and a depreciating rupee have again emerged as fresh pressure points for inflation, as imports will become costlier. "A depreciating rupee has partly offset the import duty cuts by making imports costlier," Joshi said.
In addition, with elections due in several states, the government finds itself politically hamstrung to pass on the higher crude oil prices to consumers. State-owned oil companies are already facing a huge burden due to continuing under-recoveries.
Analysts expect the WPI inflation rate to remain above 7 per cent level for the next two months, before starting to decline.
Reacting to the latest numbers, Finance Minister P Chidambaram today told reporters that the government could take more administrative measures to curb inflation. "More administrative steps will be taken as and when they become necessary to check inflation. We are in the process of persuading cement companies to roll back prices", he said.
