Inflation, measured by the wholesale price index (WPI), crept above 3 per cent, primarily due to costlier aviation turbine fuel and manufactured goods prices, as economists warned that it could rise further in the coming weeks.
Inflation for the week-ended November 3 stood at 3.11 per cent, against 2.97 per cent level a week ago. It was 5.45 per cent in the same week last year.
The Reserve Bank of India has set a medium-term inflation target of 3 per cent. The inflation rate for the week ended October 27 is well below that mark, but analysts felt that the high crude oil prices could upset the government’s price management plans.
High global crude prices have not yet been passed on to the consumer, but inflation could further head northward if oil prices were hiked.
Inflation started an upward march during November last year, crossing the psychologically worrisome 6 per cent during the early months of 2007 forcing a concerned government to initiate a series of fiscal and monetary steps.
Inflation had hit a high of 6.69 per cent in January this year.
Principal economist of Crisil D.K.Joshi felt that pressure on food prices, higher international crude oil prices and high liquidity in the system could push up the level of inflation. “I do not see food prices softening soon and liquidity is also on the higher side. In my opinion, we will see the level inflation rising in the coming weeks,” Joshi told Hindustan Times.
The RBI, in its monetary policy last month, increased the cash reserve ratio (CRR) by 0.5 percentage points to 7.5 per cent and retained its earlier GDP forecast of 8.5 per cent during 2007-08.
With a series of interest rates hikes in quick succession the RBI has quite aggressively tightened the monetary screws.
While the government cut import duty on several items, including cement and edible oils, the RBI has adopted a policy of monetary tightening hiking the cash reserve ratio (CRR) and the repo rate to contain the price line.