Primary article prices fuel inflation to 6.12pc: Assocham

New Delhi, Jan 22 (UNI) A sharp rise in the prices of primary food articles like wheat, pulses, milk and fruit from about 20 per cent to 38 per cent from April-December 2006 fueled inflation to an alarming mark of 6.12 per cent in the first nine months of the current fiscal.

The headline inflation rate touched the high partly due to significant escalations in manufactured goods prices of metals, cement and textiles from 33 per cent to over 46 per cent, according to industry chamber Assocham.

The primary food articles' contribution to the overall inflation increased mainly due to sky rocketing prices of essentials such as wheat, pulses, milk and fruit in which an average increase was recorded by about 18 per cent, it said.

It, however, in its assessment on Future Inflationary Trends has concluded that the current inflation rate will deflate to around five per cent in next few months in view of good harvest in current cropping season, owing to favourable conditions.

The supply demand mismatch gap would be gradually filled up in the coming months on account of good climatical conditions that will accelerate agriculture production, said Assocham Chief Venugopal N Dhoot.

The Chamber is of the view that though the prices of wheat, pulses, groundnut and some oilseeds have gone up in the past couple of months but the current commodities market trends suggests the future of commodities trade on the bearish side in the coming months.

Consequently, the WPI would slide down the impact of which would lead to reduction and rationalisation in the prices of essential commodities, food grains and oil seeds. The chamber holds that the demand cannot be blamed for the current inflation rate which is alarming as it is natural that it will grow due to growing consumerism.

However, Mr Dhoot said that with the impending government intervention, there will be little scope for manipulators to shoot up the prices of essential commodities as these will be contained with markets becoming more stable.

The current inflation has also a substantial element of energy cost in it which will naturally come down with decreased crude oil price internationally.

Secondly, the chamber expects some monitory interventions from the Reserve Bank of India to help sink the inflation rate by narrowing down the supply management mismatch.

The chamber said manufactured products' contribution to the current inflation was largely on account of increase in prices of metals, cement and textiles in which an average price rise in the period shot up by 13 per cent between April-December 2006.

Wheat prices have remained firm on the back of low stocks and high international prices. On a year-on-year basis, wheat prices have increased by 22 per cent from less than four per cent in April 2006, according to an analysis by the chamber.

The prices of pulses edged much higher from April 2006 and almost all essential pulses have witnessed extremely higher volatility in their prices which went up to the extent of over 44 per cent between April-December 2006.

The gap between demand and supply of pulses in the country, caused by dormant production of pulses, together with increasing consumption was estimated at around 5.25 million tonnes towards the end of last fiscal, said the Assocham President.

The prices of milk increased by almost 10 per cent between April-December 2006 despite India being the largest producer of milk in the world with its production levels going up to 94.5 million tonnes by March 2006 from 90.7 million tonnes in 2005.

Increase in input, utility and services costs accounted for the rise in prices of milk.

UNI