bank Articles

Inflation soars to new heights (07-07-2008)

Inflation is reaching new heights in India even as the ruling government is struggling to make it to the end of the term and clear off with nuclear issues. The percentile on the 21st of June 2008 for inflation was a whopping double digit of 11.63%. The fresh surge of inflation reflected on food and commodity prices rising up. As per latest reports the prices of food articles went up by almost 0.6%, food products had raised by 0.9% and the non food articles were at a rise of 0.4%. Similarly the prices for the chemicals and related products also went up by 0.6%. Machinery and machine tools were up by 0.2% and metals and alloys products rose by 0.8%. The impact of the new rise in inflation was also felt in the textile industry with the prices going up by 0.6% also. The WPI commodities remained unchanged at 237.1.

The past year had seen inflation rising and finally touching a 13 year all time high figure of 11.42%. This had been in the second week of June. The stock markets went tumbling and with the rising oil prices the stock markets all over the world had been suffering from tremendous loss. But unfortunately there was still no respite for people in the last week of the month. Instead the figures rose to a new height. As per the reports and statements of the Finance Ministry the inflation rate can soar up to 13% and then will begin a slow decent.

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Most of the financial experts are also commenting that the double digit figures are here to stay for a longer time than anticipated but from September onwards there are hopes for a gradual descent of the same. Prices of the crude oil and other crucial commodities are also expected to rise further especially in products like steel. Inflation rates are expected to touch in all time high again in the end of August or beginning of September before it starts to tumble down again.

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The steel and products made of steel, like housing, white goods, auto, capital goods and related products, are expected to give an estimated contribution of 21% inflation. The prices of cement are not expected to rise due to the capacity addition. The RBI had raised the CRR or the cash reserve ratio, which is proportion of the bank deposits to the RBI, to 8.75%. The repo rate, the amount lent to the bank by RBI, is now 8.5% for checking inflation through monetary restrictions.

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