Oil price hike and rising prices of food items have contributed to inflation. Measured by the wholesale price index, it stood at 8.75 per cent in the previous week. For the 17th consecutive week, inflation rate has been above 5.5 per cent. Analysts say, the Reserve Bank of India (RBI) would come out with some measures on the rate and liquidity side much before the July policy for curbing high inflation figure. This is the highest level of inflation during the United Progressive Alliance (UPA) regime. The annual inflation rate for the week ended August 28, 2004, was 8.74 per cent.
On June 4, the Central Government upped the price of petrol by Rs 5 a litre and that of diesel by Rs 3 a litre. The price of a Liquefied Petroleum Gas (LPG) cylinder was increased by Rs 50. Price of kerosene was left untouched.
The UPA government is not only facing political crisis in regards to the Nuke-deal, but is facing a steep road ahead as the inflation rates are expected to hit double digits in the coming weeks. These figures can prove to be very costly for the government as opposition will take strong protests. This political instability is not appreciated by the the markets, as inflation refuses to die down. It has been on an upward march for over four months.
The issue is a precarious one for the UPA government as it goes to poll next year and so far most of the fiscal and monetary measures taken have failed to moderate inflation.