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Price Spike To Keep Interest Rate High, Inflation hits 59-week peak By Sumit Kumar, Section Loans & Finances
Adding to the woes of womomic policymakers, inflation raised its ugly head to surge to a 59-week high of 6.68 per cent for the week ending March 15. This is a substantial increase over the 5.92 per cent rate of inflation clocked in the previous week.
The inflation rate, based on wholesale price index (WPI), was 6.56 per cent in the corresponding period last year The rise in the inflation rate is on account of basic metal prices, manufactured products and primary articles, according to data released by the commerce and industry ministry
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"The spike in global commodity prices is getting reflected in domestic prices. Secondly, the pressure on food prices is likely to continue. Food and commodities are the prime drivers. Inflation has gone beyond the expectations of all market players and policymakers," said D.K. Joshi, principal economist with credit rating agency Crisil. He hoped that monetary policy would remain tight and more fiscal and trade measures would be used to control inflation.
During the week, prices of iron and steel rose 5.3 per cent from a week earlier, while vegetables were up 2.5 per cent. Commerce secretary G.K. Pillai said the government had withdrawn the duty entitlement passbook (DEPB) scheme for exports of steel, cement, and non-basmati rice as domestic prices were high and local supplies needed to be increased. "When there is a shortage of steel, why give an export incentive? Prices are already very high. We don't want cement prices to go up. That is why the scheme has been withdrawn," he added. Besides measures to discourage exports, the government was considering more fiscal steps to improve supplies and rein in inflation, he indicated. Pillai said an empowered group of ministers would meet on April 2 to consider measures for maintaining adequate supply in the face of global pressure on prices. "The group of ministers would be reviewing prices of rice, wheat and procurement of edible oil," he said. Source: HT, March-29-2008
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