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Inflation turns positive after 3 months; at 0.12 percent

Last Updated: Thursday, September 17, 2009 - 16:04

New Delhi: Inflation edged back into positive
territory after 13 weeks at 0.12 percent, driven by higher
prices of essential food items and may rise further on the
back of poor farm production.

The wholesale prices-based inflation rose 0.24 percentage
points for the week ended September five against (-) 0.12 percent a week before, despite a high base of 12.42 percent a year ago.

Cost of essential items like fruits rose by an exorbitant
17.8 percent on a weekly basis. Also, prices of poultry
chicken rose by 16 percent, spices by three percent and some
pulses by one to two percent.

Inflation had been in negative territory for 13 straight
weeks due to base effect. Prices of food items, which rose
continuously during the period, may rise further on the back
of poor rainfall and resultant reduction in farm output.

Terming the transition of inflation into positive
territory as slightly faster than expected, Crisil Principal
Economist D K Joshi said the major driver are the prices of
items found in raw form (primary articles).

Both Finance Minister Pranab Mukherjee as well as Planning
Commission Deputy Chairman Montek Singh Ahluwalia had earlier
said that inflation would turn positive by September.

This has presented RBI with a dilemma on whether or not to
tighten monetary stance, since economic growth has not fully
revived. RBI Governor D Subbarao had himself said, a couple of
days ago, that this situation was indeed a dilemma.

Subbarao had said the challenge before the Reserve Bank
and the government over the next few months, "perhaps over the
next couple of years" is to withdraw from the accommodative
policy and supporting drivers of growth.

"This question of exit will be upon us much sooner than
most of the country. We have to take a call on supporting the
recovery and stemming inflationary pressure," he had said.

During the week, food items in raw form became dearer by
2.2 percent, as prices of some of items like bajra rose by
2 percent, and rice and moong became expensive by 1 percent.

Fruit and vegetable turned expensive by 24 percent.

Sugar, khandsari and gur became dearer by 40.3 percent,
pulses by 21.5 percent and cereals by 12.6 percent. At the
same time, prices of milk went up by 10.2 percent.

Among manufactured items, polyester staple fibre moved up
by 5 percent, lead ingots by 4 percent electrical relays by
3 percent and other iron steel and zinc ingots by one percent each.

However, prices of plastic containers declined by 6
percent, enamels by 4 percent and basic pig iron and foundry
pig iron by 2 percent each.

Inflation for the week ended July 11 has been revised
upward to (-) 0.63 percent from (-)1.17 percent estimated
provisionally earlier.

Bureau Report

First Published: Thursday, September 17, 2009 - 16:04

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