Mixed measures will help curb inflation, says FM

Fuel price hike pushes up inflation to 5.24%.

The impact of the recent hike in petroleum products' prices pushed up the inflation rate to 5.24 per cent for the week ended June 10, 2006.

This is the seventh consecutive week that has witnessed increased inflation. In 2004, the inflation rate had touched 7.6 per cent.

In response to the increase, Finance Minister P Chidambaram said recent attempts to curb inflation through a mix of monetary and fiscal measures would help.

Others were, however, not so confident that inflation would decline soon. In fact, there is a section that feels it may increase further. ICICI Securities fixed income analyst A Prasanna expects the inflation rate to touch 6 per cent by December this year and go even higher by March 2007.

The latest inflation data can be viewed in the backdrop of hardening interest rates, as the yield on the benchmark 10-year government bond crossed the psychologically critical barrier of 8 per cent earlier in the week.

Prasanna expects the Reserve Bank of India to hike interest rates further next month.

Government data on the wholesale price index (WPI) today showed that the annual rate of inflation calculated on a point-to-point basis stood at 5.2 per cent for the week ended June 10, against 4.72 per cent for the previous week. The annual rate of inflation for the corresponding period last year was 4.50 per cent.

The impact of the recent fuel price hike showed up the most in the index value of the fuel, power, light and lubricants category of the WPI. The index for this group increased by 1.7 per cent to 326 in the week ended June 10, 2006, in relation to the previous week.

This category of commodities was directly impacted by the fuel price hike. The rise in the index value of politically sensitive food articles was muted.

The food articles' index increased by 0.1 per cent for the week ended June 10, largely on account of an increase in the price of jowar, which jumped up 7 per cent; eggs, which climbed 4 per cent and wheat, moong and inland fish, which rose 1 per cent.

The index value of fruit and vegetables, which have seen a sharp rise in parts of the country, slid 1 per cent in the week ended June 10, this year.