Inflation rate 16 years high at 12.63%; worst is yet to come

New Delhi, Aug 21 (UNI) Inflation accelerated to its highest in the 16 years with the Wholesale Price Index (WPI) touching 12.63 per cent in the week ending August 9, with the index of the major group Manufactured Products going up by 0.2 per cent and most of the other indices moving northwards.

The WPI for last week stood at 12.44 per cent which was the highest in 16 years, and later today brought home the fact that its upward march continued unawaited.

As many as 15 products in the Manufactured Products group showed an upward movement. These included sugar, khandasri, hessian bags, craft paper, cement, deoiled cake, mixed fabrics, polyester staple fibre, pvc fittings and accessories and mustard oil.

For the group Feul, Power, Light and Lubricants, the index remained unchanged.

The index for the major group Primary Articles rose only marginally.

The sub-groups for which the index moved up are Food Articles 0.3 per cent, Food Products 0.1 per cent, Textiles 1.6 per cent, Paper and Paper Products 0.1 per cent, Rubber and Plastic Products 0.2 per cent, Non-Metallic Minerals Products 0.3 per cent.

The sub-groups for which the index moved down are Non-Food Articles 0.6 per cent, Chemicals and Chemical Products 0.1 per cent, while Basic Metals, Alloys and Metal Products declined marginally.

The soaring inflation rate is largely on account of rising prices of pulses, cement, vegetables and textiles.

Higher inpur costs are forcing the companies to raise prices.

There are fears that rising interest rates will compress aggregate demand a bit too tightly and adversely impact growth prospects.

The bourses were jittering on fears that inflation would lead to further tightening of monetary policy and bringing down profitability of the companies.

The BSE fell by as much as three per cent.

There is widespread fear that the worst is yet to come, even as the authorities have admitted that inflation will peak to 13 per cent before moving southwards.

This means there will be no let-up in monetary policy stands as consumer spending gets reduced each time the Central Bank raises interest rates.

UNI GS/SBA MP RAI2012