Inflation marches forward

Inflation touched a high of 12.63 per cent for the week ended August 9 on the back of higher food and fuel prices even as the government announced more steps to ensure adequate supply of essentials.
In the previous week, inflation was 12.44 per cent, while it was 4.24 per cent during the corresponding week last year.
The government today announced measures to control the hoarding of cereals and pulses as well as ensure more wheat and rice in the open market.
“Annual inflation of 30 essential commodities, however, continues to be range bound (5.7 per cent to 6.7 per cent) in the 19 weeks of the current fiscal,” a finance ministry statement said.
At a cabinet meeting today, it was decided to extend till April 2009 the power of states to regulate the stocks of rice, wheat, pulses and edible oils with traders.
The government also decided to sell surplus stocks of wheat and rice in the open market. The Food Corporation of India will sell directly to bulk buyers through an open tender system. The quantity and timing of the sale will be decided later.
To manage iron ore prices, steel makers and iron ore producers are holding a meeting tomorrow in Bangalore, at the behest of the government.
Officials said the government was likely to persuade iron ore producers to sell the raw material at reasonable rates to steel makers and enter into long-term contracts for the supply of the ore.
The next meeting will be held in Calcutta on August 27.
Analysts, however, differed on the possibility of an interest rate hike.
“The upward trend of inflation continues and has belied the hope that it has stabilised. The Reserve Bank of India could increase the credit reserve ratio and the repo rate by 25 basis points each,” said D.K. Joshi, principal economist with rating agency Crisil.
However, N.R. Bhanumurthy of the Institute of Economic Growth said, “The central bank is unlikely to take further monetary tightening measure until inflation peaks at 13 per cent. I expect inflation to touch this level by November-December.”

Sensex shock

The sensex today dipped over 430 points on heavy selling in interest-sensitive banking and realty stocks. The BSE bellwether settled the day at 14243.73, a loss of 434.50 points, or 2.96 per cent, from its previous close.