New Delhi: Finance Minister P Chidambaram has expressed his “concern” after inflation based on wholesale prices rose to a two-year high of 6.12 per cent.
Chidambaram said inflation was "indeed a matter of concern" and the government would take steps required to contain it. “Ultimately inflation is a monetary phenomenon and is influenced by supply side. Hence, the Ministry of Finance is in touch with both the Reserve Bank of India (RBI) and Ministry of Agriculture and Consumer Affairs. We will watch the situation carefully and take whatever steps required to be taken."
Prices of common-use items like, some pulses, tea, tomatoes and coconut, are causing concern, he said at a Confederation of Indian Industries function. Prices of some manufactured items like steel products and edible oil have risen too.
Chidambaram said his ministry contacted the RBI and the Agriculture Ministry after inflation touched 6.12 per cent for the week ending on January 6, compared with 5.58 per cent for the week before.
The rise in the index was fueled mainly by increase in prices of food articles and fuels, which may force the RBI to hike interest rates. The bank is to review the credit policy on the January 31.
Wholesale prices-based inflation crossed six per cent for the first time this fiscal. It jumped by 0.54 per cent against 5.58 per cent in the previous week. Inflation was just 3.86 per cent during the week ended January seven, 2006.
Before this week, inflation was highest at 5.58 per cent in the previous week ending December 30, 2006 as per the provisional estimate and 5.61 per cent during the week ended October 21, 2006 as per revised estimates.
Inflation is far above the threshold of 5.5 per cent of RBI's projection for this fiscal. This is likely to put pressure on RBI to take anti-inflationary measures in its January 31 credit policy review, which would directly or indirectly jack up interest rates.
Bankers have been saying short-term interest rates are under pressure after RBI hiked CRR in two phases of 0.25 per cent each, absorbing Rs 13,500 crore from the system. The wholesale price index (base 1993-94), on which the inflation data is based, rose 0.05 per cent to 208.2 points during the week ended January 6, from 208.1 in previous week.
Among food articles, fruits and vegetables, maize, arhar and wheat became dearer by one per cent each. However, prices of moong, condiments and spices declined by two per cent each, while prices of fish-marine, urad, barley, bajra, gram and jowar decreased one per cent each.
Prices of fruits, vegetables, maize, arhar, wheat, groundnut seed, cottonseed, rapeseed, mustard seed, aviation turbine fuel, naphtha and furnace oil have moved up. However, moong, condiments and spices, fish-marine, sabajra, gram, jowar, urad, raw cotton, raw jute, sugar, gur, coconut oil and imported edible oil became cheaper.
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