Inflation up at 8.24% from 8.12%

Inflation up at 8.24% from 8.12%
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First Published: Fri, Jun 06 2008. 02 03 PM IST
Updated: Fri, Jun 06 2008. 02 03 PM IST
New Delhi: India’s inflation rose 8.24% in the 12 months to 24 May, above the previous week’s annual rise of 8.1%, government data showed. The rate was slightly below a median forecast of 8.29% in a Reuters poll of analysts. Inflation for the week ended 29 March was revised upwards to 7.75% from 7.4%.
India raised domestic prices of petrol and diesel by about 10% on 5 June, its biggest hike in 12 years, and cut import duties on crude oil and petroleum products to curb losses at its state-owned refiners and fuel retailers. Economists polled by Reuters expect the price increases to drive inflation to a 13-year high of 9.2% in the week leading to 7 June.
Reserve Bank of India Governor Y.V. Reddy said on 5 June that the central bank was ready to take recourse to the full range of instruments to anchor inflationary expectations.
The government has cut import duties on a range of commodities and enforced some export bans to boost supplies and lower prices, while the central bank has sharply raised banks’ reserve requirements to drain inflation-fuelling cash from the system.
Policymakers say they expect inflation to moderate in the months to come as the full impact of the measures is felt.
Sonal Verma, economist, Lehman Brothers, Mumbai
“Inflation this week has been boosted largely by higher edible oil prices. The key is to watch out for how inflation will pan out in the coming weeks, given the increase in petrol, diesel, LPG and ATF prices recently. We expect WPI to rise to around 9.5% on a yearly basis for the week ending 7 June.
Our view remains that the RBI will tighten monetary policy using cash reserve ratio hikes — we expect another 100 basis points worth of CRR hikes this year —but we expect the repo and reverse repo rates to be kept on hold because of growth concerns.”
Shuchita Mehta, economist, Standard Chartered Bank
“The rise is pretty much in line with expectations, but given the recent hike in fuel prices we can see inflation going higher beyond 9%. Inflation still remains high and needs to be tackled, we believe the RBI may hike the reverse repo and the repo rate by 25 basis points by July.”
Rupa Rege Nitsure, chief economist, bank of Baroda
“There is some moderation, but this inflation rate has not factored in the fuel price hikes and once that happens in three weeks time inflation will cross 9%. Monetary tightening will continue full force. In view of growth moderation, the RBI will not touch the policy rates, but CRR will remain the preferred tool.”
DK Joshi, principal economist, Crisil, Mumbai
“The inflation numbers are along expected lines and the pressures will start showing up in a couple of weeks when they will reflect the fuel price hike. We may start seeing inflation hitting 9%.”
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First Published: Fri, Jun 06 2008. 02 03 PM IST