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| Pockets set burning as inflation 13-years high | | | New Delhi | June 20
Inflation on Friday shot up to a 13-year high of 11.05 per cent fuelled by rise in prices of petrol, diesel and cooking gas, giving no relief to the government from the spiralling prices in an election year.
The rise in petrol, diesel and cooking gas prices announced by the government on June 4 put the pressure on price line pushing the inflation by week ending June 7, up from 8.75 per cent in the preceding week.
Within minutes of the release of the government data, sensitive BSE index of stock markets tanked about 350 points, reflecting the nervousness of the investors about the efficacy of the measures being taken by the Finance Ministry and the Reserve Bank of India.
Besides fuel prices, rise in prices of food products particularly edible oil and manufactured goods added to the pressure on price line and woes of the government.
Previous high inflation of 11.11 per cent was witnessed on May 6, 1995.
Leading economists and analysts predicted that price pressures would prompt the Reserve Bank of India to further tighten the monetary policy, possibly by making short term lending to banks costlier.
This could further lead to increase in interest rates for cars, homes and consumer finance, economists said and feared that present situation could also force a hike in lending rates for the industry and many banks are already contemplating hiking the prime lending rate.
"The high inflation may force the RBI to increase the repo rate (short term lending rate to banks) by up to half a per cent," Principal Economist of rating agency CRISIL D K Joshi told PTI and added that unless fuel prices are controlled the prices would be a major challenge.
During the week under consideration, the Fuel Index rose by 7.8 per cent on account of "higher prices of diesel (21 per cent), LPG (20 per cent), Naptha (17 per cent) furnace oil (15 per cent), ATF (14 per cent), Petrol (11 per cent), high speed diesel (10 per cent) and bitumen (7 per cent), a government release said.
Though food index declined by 1.1 per cent due to lower prices of fruits and vegetables and coarse grains, prices of fish, spices, maize and gram moved up by about 1 per cent, it said.
There was almost an all round increase in edible oil prices led by sunflower oil that became costlier by 10 per cent, followed by groundnut and cotton seed oil (three per cent), imported edible oil, vanaspati and soyabean oil by two per cent each.
Commenting on rising prices BJP leader and economist Kirit Somaiya said, "Congress has become alternate to 'mahangai' that is inflation. It is double digit after 13 years.
"The Congress government led by Manmohan Singh is equalising the inflation of the previous Congress government of 1991-95," he said.
According to the index, iron and steel sector witnessed a hefty price increase during the week. While the price of steel soared by 14 per cent, pig and foundry iron became costlier by 11 per cent.
The price of bar and rounds rose by 9 per cent followed by steel sheets (4 per cent) and pipes and tubes (2 per cent). The index of the textile products, according to the data also grew by 0.1 per cent on account of higher prices of cloth, sacking bags and woolens.
Among the manufactured products category, the prices of ceiling fans during the week went up by 6 per cent. As regards the chemical products, the index rose by 0.2 per cent due to rising prices of all kinds of acids, caustic soda and blank cassettes. However, in the Non-Metallic Minerals Products category, the prices of cement declined marginally. |
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