ess Trust Of India / Mumbai/New Delhi August 6, 2004
| Inflation to be kept under check: Govt |
| Inflation shot up to 7.51%, the highest in the last two years, due to soaring prices of vegetables and manufactured products. |
| Markets - bonds, stocks and rupee - dropped in reaction to higher-than-expected inflation figures, but bounced back towards the end of the day. |
| Spot rupee, which dipped to a low of 46.48 per dollar after the release of the inflation data, bounced back to close at 46.3750 per dollar on dollar sales by central bank. Sensex, which dipped to a low of 5,166, finally closed with a loss of 56 points at 5,197. The Nifty touched a low of 1,627, but closed with a loss of 22 points at 1,633. The benchmark 10-yr G-sec, which saw yield rise to 6.62% in early noon deals, was being traded at an yield of 6.28% as against the last close of 6.14%. The point-to-point wholesale price index (WPI) inflation shot up by a per cent to cross the 7.5% mark during the week ended July 24. In the year-ago period, it stood at a mere 4.27%. |
| The WPI rose by nearly one per cent to 186.2 points during the latest reported week. It was 173.2 points in the previous year period. |
| A whopping 189% rise in the price of iron ore led to 107.1% rise in the index of minerals to 304.2 points. |
| The primary articles' group index shot up by 3% to 191 points owing to a steep rise in the prices of food items and non-food articles. Mineral prices, too, more than doubled during the latest reported week. |
| Food articles' prices rose by over 1% to 185.9 points due to costlier vegetables (5%), fruits, jowar and condiments and spices (3% each), bajra, barley and urad (2% each) and milk, ragi,masur, gram, rice, maize and moong (1% each). However, there was a 1% decline in the price of eggs. |
| The index of non-food articles' group rose by 0.2% to 194.9 points due to higher prices of castor seed (4%), sunflower and rape & mustard seed (2% each) and linseed, fodder and groundnut seed (1% each). |
| However, prices declined for raw rubber (3%), gingelly seed and raw silk (2% each), copra, tobacco and raw cotton (1% each). |
| Fuel, power, light and lubricants group index remained unchanged at the previous week's level of 274.4 points despite the hike in the prices of petroleum products in recent weeks. The index was 249.4 points in the year-ago period. |
| The index for manufactured products' group increased 0.3% to 164.9 points due to rise in prices of food items, textiles, paper, leather, chemicals, non-metallic minerals and transport equipment. The index was 154 points a year ago. |
| Meanwhile, the government today said the rise in inflation to 7.51% was not a cause for worry and the advent of monsoon and an "appropriate" mix of policy will keep it under check. "With the arrival of monsoon and an appropriate mix of policy, inflation is expected to go down," chief economic advisor Ashok Lahiri told reporters today. Finance minister P Chidambaram declined to comment on the rising inflation. Planning commission deputy chairman Montek Singh Ahluwalia maintained that the high inflation was not a major problem as it was seasonal, and the price situation would improve with monsoon. Lahiri attributed the increase in inflation to the statistical carry-over effect, concerns over the late arrival of monsoon and hardening of international oil prices. However, market players are a worried lot since they feel that inflation may rise further when the effect of the second hike in oil prices is taken into account. |
