Inflation back in double digits after 16 months

Wholesale prices-based inflation stood at 10.06 per cent in February, breaching the double-digit mark, although quick estimates for April showed it was at a lower rate of 9.59 per cent.

The figures for February inflation were provisionally estimated at 9.89 per cent, but final numbers showed it was in double digits. Inflation had last breached the double-digit mark in October 2008 (11.8 per cent).

Inflation data for April showed potato prices fell 28.70 per cent, and onion dropped 11.62 per cent. Sugar prices fell by 5.74 per cent on a monthly basis.

Food inflation in April stood at 16.87 per cent, against 16.65 per cent in the previous month, with prices of pulses rising by 2.47 per cent and milk by 2.96 per cent.

On a yearly basis, these prices rose much faster — pulses by 30.42 per cent and milk by 21.95 per cent. Besides, vegetables rose 31.90 per cent.

Also fuel prices rose 12.55 per cent, essentially because the Budget increased Customs and excise duty on petrol and diesel.

The main area of concern, however, remained metal, since hardening global prices were putting pressure on domestic rates. Iron and steel prices rose 11.40 per cent in April on a monthly basis and basic metal alloys and metal products turned expensive by 6.72 per cent.

Analysts had forecast double-digit inflation and Finance Minister Pranab Mukherjee had himself not ruled out inflation reaching double digits.

“I will not be surprised, if it (inflation) reaches double digits in March,” he had said in Parliament. But this happened a month earlier.

“It is expected that it could be in double digits in March, April, as revised figures are generally higher than provisional ones. But, it is difficult to predict,” Crisil Principal Economist D K Joshi said.

In April, overall inflation came down despite prices of a number of food and non-food items, such as metals, rose.

The fall is partly due to a high base effect — which means the inflation numbers in the year-ago period had already started rising, making the current rate of growth look relatively small.

Last year this time, inflation was 1.31 per cent, against 1.2 per cent in March 2009. In March this year, wholesale price-based inflation was at 9.90 per cent.

In Kolkata, Chief Economic Advisor Kaushik Basu said inflation would fluctuate in the next three months before falling.

HDFC Chief Economist Abheek Barua said: “May numbers could be around 8.5 per cent as the base was quite high last year. Although there might be some increase in June because of the base effect.”