Inflation woes continue, climbs further to 8.75%

Inflation touched 8.75 per cent by May end, the highest during the UPA government's tenure, mainly due to rising prices of food articles and vegetable amid fears that the recent increase in fuel prices would push it past 9 per cent.

The latest figures of rate of rising prices for the week ending May 31, up from 8.24 per cent in the preceding week, bring new worries to aam admi leading to apprehension that costlier diesel prices would have a chain reaction.

The rising prices of milk, pulses, spices, fruit and vegetables continued to pose a major challenge before the Manmohan Singh government in an election year even as Finance Ministry in tandem with the Reserve Bank of India pursued tough policy and monetary measures to tame inflation.

The previous high in the UPA regime was 8.33 per cent as per the provisional figure in the week ended August 28, 2004.

Analysts predict that once the impact of rise in prices of petrol, diesel and cooking gas, announced earlier this month, is taken into account the inflation, which is now at a seven-year high, would go past nine per cent mark when early June figures come out.

As part of inflation control measures, the RBI had on Wednesday increased the interest rate on its short-term lending to bank by 0.25 per cent to eight per cent, prompting the banks to consider a rise in lending rates for consumers and industry.

The inflation stood at 5.09 per cent in the corresponding week a year ago.

For the week April 5, 2008, the government revised the figure upward to 7.71 per cent from 7.14 per cent shown provisionally on April 18.

The continuous rise in inflation has forced the banks to increase the interest rates which analyst feel could further add to the cost factor. However, the monetary measures are aimed at cooling high demand pushing prices up.

Most of the banks have the prime lending rates pegged at around 13 per cent. Besides raising the short-term lending rate (repo rate), the Reserve Bank had also sucked over Rs 27,000 crore out of the economy by increasing the Cash Reserve Ratio.

The government has also taken several fiscal and administrative measures to cool the inflation which has become a worldwide concern because of skyrocketing crude oil prices.

The next week data, that would capture the petrol and diesel price hike, is likely to push the inflation rate past 9 per cent.

Petroleum Secretary MS Srinivasan had said the hike could lead to an about 0.5-0.6 per cent rise in inflation rate.

During the week, prices of fruits and vegetables rose by one per cent, pulses 0.4 per cent, eggs by four per cent, spices by two per cent and mutton mil and wheat by one per cent each.

Among non-food articles, mustard seed became dearer by three per cent, raw cotton by four per cent, raw rubber by five per cent, ground nut seed by two per cent.

Among the manufactured items, mustard oil were expensive by six per cent, cotton seed oil by three per cent, groundnut oil and coconut oil by one per cent.

However, prices of butter declined by one per cent.

During the week, cement prices hardened marginally while beer and alcohol prices surged 10 per cent, cotton yarn 16 per cent, printing paper five per cent, epoxy resins 16 per cent, fireworks 12 per cent and excavators 10 per cent.

However, prices of zinc and lead ingots softened by five per cent, sacking bags by three per cent and Hessian cloth by two per cent.