Sizzling inflation could hit 12%

Blame It On Costlier Edible Oil, Food & Steel

Amiti Sen NEW DELHI

INFLATION, which is already in double digits, is set to rise further this week and may even top 12% on the back of rising prices of edible oil, food products, fruits & vegetables and iron and steel. The headline inflation figures, to be released on Friday, will reflect the wholesale price index for the week ended June 21. Last week, inflation had reached a 13-year high of 11.42%.
    Government officials told ET that the prices of food articles — including edible oil, tea and salt — have gone up considerably during the week. In the previous week too, prices of primary food articles had risen 14%. "This week, prices in the food product category are set to rise further," an official said. Finance ministry officials had recently said that inflation could inch up to 13% before making a slow descent.
    Iron and steel is another sector which is set to see a price rise. Last week, reporting of fresh prices for steel by the ministry resulted in prices going up sharply by over 30%. Iron and steel prices would be on a high this week too. Vegetables and fruits would also contribute to the rising price index, the source added.
    Sources said the higher MSP for wheat and rice would continue to fuel inflation. "Prices of rice and wheat have contributed to inflation in the past few weeks and would continue to do so," the source said.
    Prices of oil, however, have remained stable in the week under consideration. While prices of regulated oil including petrol and LPG would remain stable in the coming weeks as well till another price hike is announced, the index for deregulated oil is likely to go up in the coming week. "The recently announced hike in ATF price is likely to get reflected in next week's data," sources said.
    A high base effect will also contribute to higher inflation this week. Last year, inflation was low during this period and had dipped to about 3.07% for the week ended October 13, 2007. Double-digit inflation is expected to continue over the next few months. The WPI is calculated point to point which means that it compares the prices prevailing in the week under consideration with the prices in the comparable week of the previous fiscal.
    amiti.sen@timesgroup.com