Leading Indicator IV - Industrial raw material inflation

ECONOMIC SURVEY 2003-04/ STATE OF THE FISC

Where is the economy headed?

Industrial raw material inflation is an expectations sensitive indicator. The prices of important industrial commodities such as chemicals, steel, synthetic fibres, paper, etc, have been firming up and saw a sharp rise in "" up from 5.4 per cent in October 2003 to 8.4 per cent in January 2004.

After that inflation decelerated to 3.4 per cent in April 2004. The lower inflation level should however be seen in context of the fairly high inflation in this segment in April-May 2003.

In the current fiscal, industrial raw material and fuel prices pose the main threat to inflation. The overall wholesale price index based inflation is expected to cross the 6 per cent mark.