Statement of Finance Ministry on Inflation
Following is the statement on inflation issued by Deptt. of Economic Affairs, Ministry of Finance today (August 22, 2008):
"Inflation measured by WPI continues to be a matter of concern. It has touched 12.63 per cent for the week ending August 9, 2008.
Without underplaying the seriousness of the concern, Government wishes to place the matter in perspective.
There are three groups which constitute the 435 items that are taken into account for reckoning the WPI: (i) primary articles; (ii) fuel and power; and (iii) manufactured products.
For the week ending August 9, 2008, in the fuel and power group, the index was stationery at 380.4. The annual point-to-point inflation for this group also remained unchanged at 17.99 per cent.
The primary articles group consists of 98 items. The index moved from 249.5 in the previous week to only 249.6 in the week ending August 9, 2008. Yet, the annual point-to-point inflation for this group increased from 11.43 per cent to 11.83 per cent.
In the manufactured products group, the index increased from 206 in the previous week to 206.4 in the week ending August 9, 2008. This is reflected in the annual point-to-point inflation of this group which increased from 10.75 per cent to 10.91 per cent.
The point to be stressed is that the WPI as well as the inflation rate for each group is measured on an annual point-to-point basis. Hence, it is largely influenced by the trend in the corresponding week of the previous year, which is the base year. In the corresponding week of August 2007, there was:
- a decline in the index for the primary articles group
- no change in the index for the fuel and power group
- a moderate increase in the index for the manufactured products group
- the WPI for that week declined from 4.39 per cent to 4.24 per cent.
This trend of a declining WPI continued up to November 24, 2007.
Consequently, even a small movement in the index in the current year is impacted by the “base” and the WPI for the group as well as the WPI for all commodities shows a rise.
While the WPI continues to be a matter of concern and efforts are being made to address the problem through monetary steps as well as improving the supply side, it will be relevant to note that the rate of inflation for the 30 essential commodities stands, currently, at 6.74 per cent.
Government has taken the following measures to improve the supply side:
- Government has approved open market sales of up to 60 lakh metric tonnes of wheat.
- Government has decided to release an additional quantity of 5 lakh metric tonnes of non-levy sugar during August and September, 2008.
- Government has introduced a Scheme for the supply of edible oil with a subsidy of Rs.15 per kilogram. Public sector undertakings will import 10 lakh metric tonnes of edible oil. 2.8 lakh metric tonnes have already been contracted for and 1.6 lakh metric tonnes have been actually imported and distributed to the States.
- Government is examining a scheme for supply of four lakh tonnes of pulses with a subsidy of Rs.10 per kilogram."
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