Pioneer 16/03/2010 P 10
Inflation at 16-month high at 9.89% in Feb
PNS | New Delhi
There is no respite for common man from high prices as inflation reached the highest in last 16 months at 9.89 per cent in February on the back of rising prices of essential food items and the hike in excise duty on fuel.
The figure has already surpassed the RBI’s year-end projection of 8.5 per cent in January and could cross the double-digit mark in March,” said Chief Statistician Pronab Sen.
The wholesale price-based inflation shot up 1.34 percentage points in February over 8.56 per cent in the previous month. But, Finance Minister Pranab Mukherjee said that pressure on food prices is easing. “I am afraid that we will have to deal with it (high inflation) for some more time. Inflationary pressure on food items have started coming down,” he said to a query on inflation nearing double digits, on the sidelines of AIMA function in New Delhi
Mukherjee had earlier said that across-the-board hike in excise duty by 2 per cent in the Budget would push up the wholesale price-based inflation by only 0.41 per cent.
Among food items, prices of sugar, pulses and potatoes increased by 55 per cent, 36 per cent and 30 per cent, respectively during the year.
The fuel price index shot up by over 10 per cent, mainly on account of higher prices of petrol and diesel. While petrol became dearer by 11.73 per cent, diesel prices increased 8.85 per cent.
With inflation slowly spreading from food items to other areas, analysts say the RBI may tighten money supply further by raising interest rates in its April policy.
Already, some banks, including ICICI Bank, HDFC group, and the Bank of India have raised interest rates.
“To tame inflation, RBI could raise short-term lending and borrowing rates by 25 basis points each,” Crisil principal economist D K Joshi said .Partly withdrawing the stimulus given to the industry during the slowdown, Mukherjee raised the excise duty from 8 per cent to 10 per cent and increased customs duty on crude and excise duty on diesel and petrol in the Budget.
Inflation for food items was at 17.70 per cent in February, while for manufacturing it was 7.42 per cent. Sugar, prices rose 55.47 per cent on yearly basis.
“Inflation is primarily driven by food prices, but it is getting more and more generalised,” Joshi said.
Asian Age 16/03/2010 P 16
Union finance minister Pranab Mukherjee being greeted by AIMA president Sanjiv Goenka at a function of AIMA in New Delhi on Monday. PHOTO: PTI
New Delhi, March 15: High prices continue to bother, and the pain is likely to get worse before it gets any better. For February 2010, inflation – the rate of price increase – clocked in at a 16-month high of 9.89 per cent. This is outside the Reserve Bank’s comfort zone of 8.5 per cent.
Economists say that the numbers for March are likely to be in double digits. Given the strong number for industrial production that came out last week, the RBI may choose to go for an interest rate hike at some point. Higher prices of food and fuel are being blamed for the overall jump in inflation. Price hikes for diesel and petrol were announced the in union budget, but the full impact of these hikes on prices will be felt only in March.
The chief economic advisor in the finance ministry, Mr Kaushik Basu, said that inflation is likely to remain high in March due to base effect after which it will start declining.
Meanwhile, the finance minister, Mr Pranab Mukherjee, said in New Delhi that even though the wholesale price inflation is high, food prices have started to fall. Internationally, the prices of some commodities such as sugar, wheat and edible oil have fallen significantly from the earlier highs.
A good rabi harvest is also expected to play a role. Citi India economist, Ms Rohini Malkani, said that while inflation will come down from double digits due to fading base effect, good monsoon and healthy winter harvest, inflation is likely to remain in high single digits rather than at the preferred range of five per cent. This in turn could potentially keep the rate structure higher.
“There are upside risks to our end-March target of 10 per cent on the WPI, especially as the impact of the fuel price increases and the excise tax roll-back will begin to be felt in March,” said Goldman Sachs.
It warned that the RBI could hike the interest rates by half a per cent by the April 20 policy meeting. In its note, the research house said that several indicators such as IIP and motor vehicle sales show that demand is strong. Therefore, it expected the RBI to start withdrawing money from the financial system.
Business Standard 16/03/2010 P 6
New Delhi, Mar 15 (PTI) Finance Minister Pranab Mukherjee today said some aspects of austerity drive will come to an end on March 31, amid speculation that ministers and bureaucrats may not need to fly on only economy class from next fiscal.
"As it was applicable till March, 31 2010. Some aspects of austerity measures will come to an end ," he told reporters on the sidelines of AIMA function here.
Speculation was rife that compulsory economy class travel by ministers and officials would not be extended beyond March 31, since economy is now picking up.
However, the Finance Minister did not specify which aspects of austerity measures will be done away with.
The Office Memorandum issued by the Finance Ministry was valid for the fiscal 2009-10 and would not be applicable from April 1 unless a fresh order is issued extending it.