High petrol prices push inflation to 10.55 pc in June

New Delhi, July 14 (PTI) Spurred by an increase in oil
prices, the overall inflation continued its double-digit run
for the fourth straight month in a row at 10.55 per cent in
June, mounting pressure on Reserve Bank of India to raise key
interest rates in its July policy review.
The wholesale price-based inflation remained above 11 per
cent in March and April but eased to 10.16 per cent in May.
It was in the negative at 1.01 per cent in June 2009,
government data showed.
Finance Minister of India Pranab Mukherjee, however,
exuded confidence that inflation would fall to 5-6 per cent by
the year-end with the advent of kharif crop in the market.
"It (Inflation) is hovering around double digit. After
Kharif season is over there will be a moderating impact which
is already being felt," he said.
To combat inflation, the RBI had raised policy rates
thrice this year and experts peg another 25 basis points hike
in its scheduled monetary policy review on July 27.
"July figures would be slightly higher. The RBI may raise
policy rates by another 25 basis points. Post July, we could
see some dip in inflation as the base effect starts waning,"
PMEAC member Govinda Rao said.
The double digit inflation in June could be partly
attributed to low base in the year-ago period when the
inflation was in the negative, which means even a small
increase would seem large.
Finance Secretary Ashok Chawla said, "Inflation is almost
as it was. This kind of minor ups and downs is something on
which one cannot comment."
Economists expect prices to cool from August as the base
effect impact starts fading.
"Food prices are gradually softening. July figures will
be high as the full impact of fuel price hike would be passed
through," Rao said.
The government on June 25 had hiked petrol prices by Rs
3.5 a litre while deregulating its pricing, and diesel by Rs 2
a litre. Besides, it raised prices of LPG (cooking gas) by Rs
35 a cylinder and kerosene by Rs 3 a litre.
The country's chief economic adviser Kaushik Basu had
last month said that he expects the hike in fuel prices to
lead to one percentage point rise in inflation.
"We expect WPI inflation to remain above 10 per cent
until July and above 8 per cent until October. Anchoring
inflation expectations is likely to remain a key policy
concern for the RBI," Barclays said in a research note.
In June, the fuel index rose by 1.7 per cent, due to
higher prices of kerosene (9 per cent), electricity (4 per
cent), petrol (2 per cent) and liquefied petroleum gas (3 per
cent).
Food prices rose marginally by 0.20 per cent in June as
prices of cereals, rice and wheat declined on a month-on-month
basis.
Among manufactured items, wood products prices rose by
5.4 per cent due to higher rates of plywood commercial planks.
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