RBI raises inflation target to 6.5 percent

Tuesday, 26 October 2004, 07:00 Hrs
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MUMBAI: The Reserve Bank of India (RBI) Tuesday raised the inflation rate target for the current fiscal year to 6.5 percent from the five percent projected earlier due to high global crude prices.

The central bank said in its mid-year monetary and credit policy review that there were uncertainties regarding the future course of international commodity prices, particularly oil prices.

"Assuming that there would be no further major supply shock and liquidity conditions remain manageable, the point-to-point year-end inflation based on wholesale price index (WPI) for the year 2004-05 could be placed around 6.5 percent," it said.

The annual rate of inflation continued its southward trend for the fourth consecutive week to reach 7.1 percent in the week ended Oct 9 due to lower prices of food products including oil cakes and wheat flour.

"It is now clear that the year-end inflation projection will exceed what was anticipated at the beginning of the financial year, the RBI said.

"In retrospect, the magnitude and persistence of supply shocks was beyond what was anticipated by many."

The inflation rate, as measured by the official WPI, has been moving down over the past few weeks from a high of 8.3 percent early August due mainly to a fall in the prices of essential commodities.

But with crude prices testing new highs in global markets, worries have started to resurface over the inflation once again breaching the four-year highs.

The RBI said among primary articles, a high increase in prices was observed mainly for iron ore, tea and oilseeds. Prices of manufactured products increased by 7.1 percent as compared with 5.1 percent last year.

Among manufactured products, a significant increase in prices was observed in basic metals and alloys, non-metallic mineral products and non-electrical machinery.



Source: IANS
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