Inflation at a new 13-yr high of 12.44%

Surging fruit and fuel prices pushed up the wholesale price index (WPI)-based inflation to a new 13-year-high of 12.44 per cent for the week ended August 2, even as the central bank has adopted monetary tightening measures and the central government is pursuing policies to control the prices of key products.

The WPI had crossed the 12 per cent mark for the first time in 13 years in the previous week and is significantly higher than the 4.39 per cent reported a year ago.

Reacting to the figure, the finance ministry said in a statement: “After being nearly stable for four weeks, this rise (in WPI) has come as a major disappointment.”

However, it claimed that inflation rate for the group of 30 essential commodities was marginally lower at 6.54 per cent for the week ending August 2, against 6.66 per cent in the previous week.

In an attempt to control inflation, the Reserve Bank of India (RBI) had increased its interest rate by 125 basis points (one basis point is one-hundredth of a percentage point) in two stages — in June and July. This led the benchmark repo (repurchase) rate to touch 8.5 per cent.

The central bank also increased the cash reserve ratio (CRR), the quantum of money commercial banks keep with the central bank, by 75 basis points in June to take it to 8.75 per cent. As banks were required to deposit more money with the central bank, it curtailed the liquidity.

The prime minister’s Economic Advisory Council (EAC) yesterday said containing inflation was a required condition for sustained economic growth.

Prices of fruit went up by 8.9 per cent for the week under consideration. Among food articles, pulses like maize, moong, arhar also became dearer, as did maize, condiments and spices, jowar and fish-marine. However, prices of vegetables declined by 3.7 per cent.

In case of manufactured products, prices of food products like imported edible oil declined by 13 per cent. Other edible oils also declined.

In the fuel category, prices of light diesel oil went up by 16 per cent, bitumen and furnace oil by 8 per cent, and aviation turbine fuel by 3 per cent. However, naphtha declined by 2 per cent.

Among other manufactured products, prices of textiles, rubber, chemicals and machinery products rose.