Inflation shot up yet again this week with economists predicting that the rate will go up by another quarter per cent in the coming weeks and force the Reserve Bank to hike interest rates again. The government announced today that its annual inflation rate is 5.24% in early June—its highest level recorded since May 2005.What is worrying economists is that Consumer Price Index—which shows the real effect of rising prices on millions of Indians—will rise as the data will come in after a 2-month lag.‘What we should be looking at the CPI that affects the common man on a day-to-day basis,’’ says Mumbai Economist, Siddhartha Roy. ‘‘As compared to WPI, almost 52.5% of weightage is given to the food articles in consumer price index,’’ he said.This week’s wholesale inflation index shot up due to an increase in the cost of fuel, food and manufactured goods. Its effect on CPI will be known only after two months though consumers across the country are already complaining of higher sugar, pulses, and wheat. The hike in petrol and diesel prices is making the prices of fruits and vegetables increase as transporters are asking for higher rates.‘‘If we add the impact of oil prices to the CPI, then the index will shoot far above the 3.84% reached in April,’’ Roy said. The only silver lining is that higher WPI will result in increased dearness allowance for the government employees.Finance Minister P Chidambaram meanwhile said the government is taking urgent steps to contain rising prices. ‘‘Please remember, no country can avoid inflation. The spurt in inflation in the last few weeks is due to India’s high economic growth rate,’’ Chidambaram said at the valedictory function of Canara Bank’s centennial celebrations.Saying that he was confident that the recent measures will moderate inflation, Chidambaram added: ‘‘If necessary, we will take further steps.’’On Thursday, the government allowed private players to import wheat, pulses and sugar under easier terms in order to hold down the price of foodstuffs, which have shot up in the past few weeks. It is also importing wheat from Australia to stabilise prices in the country.Meanwhile, yield on the benchmark 10-year bond rose six basis points to 8.19%, its highest since May 2002, as investors priced in more interest rate increases in India and the US.
