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Inflation has been on a declining trend and stood at 5 per cent on February 5, 2005 compared to 6.1 per cent a year ago. This has been stated in the Economic Survey for the year 2004-05, presented in the Parliament today.
Stating that unfavourable monsoon at home and hardening of international prices of minerals, metals, crude oil and related products led to acceleration of WPI (Wholesale Price Index) inflation since May 2004, the Survey points out that sound macro-economic management by the Government coupled with specific monetary and fiscal measures led to continual deceleration of WPI inflation since then.
The Survey further stresses that containment of inflation remains high on the agenda of the Government, as inflation hurts everybody, particularly the poor whose incomes are not indexed to prices. Anti-inflationary policies of the Government include strict fiscal and monetary discipline, rationalization of excise and import duties of essential commodities so that there is no undue burden on the poor, effective supply-demand management of sensitive items through liberal tariff and trade policies, and strengthening the public distribution system, it adds.
Inflation rates for both manufactured products and primary articles were lower at 5.1 per cent and 1.5 per cent, respectively as on January 22, 2005, compared with 6.6 per cent and 4.1 per cent, respectively on the corresponding date last year, the Survey further states.
But, there was an acceleration of inflation for the fuel and power group from 7.7 per cent last year to 10.1 per cent this year due to hardening of international prices of oil and minerals and rise in domestic production cost, it adds.
Observing that there are no supply constraints in the domestic market, the Survey points out that domestic production of minerals, coal, POL (Petroleum, oil, lubricants), and metal groups except steel has improved in the current year.
Furthermore, all these products are tradable. Therefore, current high inflation is not of the demand-pull variety, but basically of the cost-push type, driven by a hardening of international prices of oil, minerals and metals, the Survey adds.
HB/AKS/CP
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