Inflation up, growth targets may go awry

The unabated rise in inflation is bound to impact the economic growth though it might not be severe, said Subhashish Gangopadhyay, adviser to Finance Minister P Chidambaram.     

Reflecting the pressures on economy, industry grew by 3.8 per cent in May on the back of five per cent in April. The fall is sharper compared the level of over 10 per cent in the same period a year ago.     

On the other hand, inflation continued to rise from its 13-year high to 11.89 per cent for the week ended June 28, data for which was released by the government today.     

Reacting sharply to weak indicators of economy, the stocks markets also plunged today with the benchmark Sensex taking a hit of over 450 points.     

RBI in its quarterly review in the last week of July may revise the interest rates upward making industrial borrowings costlier which could affect economic activity.     

The government, however, was quick to point out that prices of essential commodities which include foodgrains, pulses, edible oils, vegetables, dairy products and others, have more or less stabilised.     

According to the data, inflation rose on account of rising prices of coconut oil that soared by 11 per cent, mustard oil by five per cent, soya oil by four per cent, while fruits and vegetable, pulses, jowar and barley increased by one per cent each.     

Despite attempts made by the government to tame price rise, items like cement increased by over one per cent and edible oils by two per cent.