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February 9, 2001 		Feedback  
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Inflation seen rising in coming months

B B Bhattacahraya, acting director of the Institute of Economic Growth has in his recent studies indicated that the inflation rate based on whole sale price index is expected to increase further in the coming months.

He said that the poor performance of the industrial sector and an erratic monsoon might put upward pressure on the prices from the supply side. The recent increase in the money supply will also add to it.

''On balance, it is expected that the inflation rate might be between nine and ten per cent in the coming months,'' Bhattacaharya said.

The year on year inflation rate, calculated on the basis of the wholesale price index (WPI) has increased from 7.45 per cent in November to 8.2 per cent by the last week of December, 2000. Though sugar and edible oil prices have shown a negative growth rate (of -2.9 and -14.4 per cent respectively), 30.3 per cent increase in fuel, power and lubricants and 10.3 per cent increase in cement have kept the inflation rate above seven per cent for the third consecutive month.

Based on the WPI data up to December 2000, Bhattacharya said his studies forecast that the inflation rate for the next four months will be 8.6 per cent, 9.02 per cent, 9.6 per cent and 10 per cent.

He pointed out that the year on year inflation rate, based on consumer price index (CPI) is showing a declining trend. It has decreased from 3.49 per cent in October to 2.75 per cent in November 2000. The reduction in CPI may be attributed to the reduction in the prices of agricultural commodites, particularly rice and wheat.

The present trend seems to be contradictory. While WPI is rising, CPI is falling. This raises doubt about the efficacy of current CPI estimate as a representative of the retail market prices in India.

Based on the CPI data up to November 2000, inflation rate for the next five months are forecast to be 4.6, 4.75, 4.85, five and 5 per cent respectively, Bhattacharya said.

UNI

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