Inflation above 7% in April;limits scope for interest rate cut

The Wholesale Price Index (WPI) inflation increased in April from 6.89 per cent March.

While inflation is lower in April from 9.74 per cent a year ago, high numbers are disconcerting for the government.

Both Finance Minister Pranab Mukherjee and Chairman of the Prime Minister's Economic Advisory Council (PMEAC) C Rangarajan expressed concern over the rate of price rise.

High inflation is a setback to the big picture of the economic growth as well. Prices are rising along side decline in industrial production. Index of Industrial Production(IIP) contracted by 3.5 per cent in March and GDP growth slowed to three-year low of 6.9 per cent in 2011-12.

As per the official data released today, food inflation increased to 10.49 per cent in April, from 9.94 per cent in the previous month.

Among the food items, which have a weight of 14.3 per cent in the WPI basket, vegetables turned costlier by a whopping 60.97 per cent.

Besides, pulses were expensive by 11.29 per cent in April Year-on-year, milk prices went up by 15.51 per cent in April, egg, meat and fish by 17.54 per cent.

"Food inflation is a matter of concern, particularly it has reached the double digit... State governments have to take appropriate steps, I will also discuss with them," the Finance Minister said.

For the first time since March, 2010, RBI had lowered the benchmark interest rates by 0.5 per cent on April 17 with the industry clamouring for more cuts. MORE