Inflation at 3-yr high of 7%, growth fears spread

A rise in the price of “minerals” was a significant factor that led to the prices of all primary articles increasing by 1.8 per cent, as compared to the previous week. Primary articles — comprising food and non-food commodities as well as minerals — have the second highest weightage in the wholesale price index.

According to the inflation figures, while the index for food and non-food commodities increased by 0.1 per cent and 0.4 per cent respectively, the index for minerals increased by a whopping 38.2 per cent, largely on account of a 46 per cent increase in the prices of iron ore.

Earlier this week, the Cabinet committee on prices had sent out a strong message to steel producers to “observe restraint” and hold back any price increase. On Thursday, steel producers, after a meeting with the government, agreed to roll back prices by Rs 500-2,000 per tonne, depending on the form of steel.

Besides announcing a slew of duty cuts for edible oils, the government also imposed a ban on the export of rice in order to ease the supply situation within the country. In fact, it is learnt that the government just stopped short of imposing price controls through administrative orders.

Based on today’s inflation figures, within food articles — which carries a significant weight of over 15 per cent in the WPI — the price of gram increased by 3 per cent, masur by 2 per cent, while prices of fruits & vegetables, urad and moong all increased by 1 per cent each as compared to the previous week.

Figures show that prices of gingelly, rape & mustard seeds increased by 5 per cent each, while linseed increased by 3 per cent. The index for manufactured goods that accounts for the highest weight of 63.75 per cent in the WPI rose by 0.2 per cent — this category includes the crucial edible oils component where the prices increased by 1.6 per cent as compared to the previous week.