Fuel price hike may push inflation over 13-yr high of 9%

Fuel price hike may push inflation over 13-yr high of 9%
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First Published: Wed, Jun 04 2008. 03 52 PM IST
Updated: Wed, Jun 04 2008. 03 52 PM IST
PTI
New Delhi: Inflation is bound to cross a 13- year high of 9% from the current level of 8.1% as a fallout of today’s sharp hike in petrol and diesel prices, said economists.
“It (inflation) could cross 9% in the near term owing to the hike in petrol and diesel prices,” HDFC Bank Chief Economist Abheek Barua told PTI.
Besides, the base effect is also not favourable as the inflation is being calculated at the lower base, he said. The base effect relates to inflation in the corresponding period of the previous year.
Petrol price was today hiked by Rs 5 per litre, diesel by Rs 3 a litre and cooking gas by Rs 50 a cylinder.
Inflation was over 9% nearly 13 years back in September, 1995.
Petroleum Secretary M S Srinivasan said the hike could lead to an about 0.5-0.6% rise in inflation rate.
Petrol and diesel prices, which have gone up by 11% and 8.5% respectively, will increase the inflation rate by about 0.3% while LPG cylinder would add 0.2-0.3% to the rate.
Besides, there would be cascading effect of diesel price rise on commodities in due course of time by way of higher transportation cost, resulting in further pressure on inflationary expectations.
According to Crisil Principal Economist D K Joshi, headline inflation could definitely cross 9 per cent in the week to come when inflation data would capture the oil price hike.
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First Published: Wed, Jun 04 2008. 03 52 PM IST