Inflation Seen At 5% For 2004-05

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Mumbai, May 18: The RBI has now admitted that there was an overhang of problems on account of oil prices and large domestic liquidity, partly reflecting global liquidity. The RBI has also said that inflation rate during 2004-05 is likely to be affected by the movements in global oil prices and trend in commodity prices.

The RBI has put its inflation target at five per cent for the fiscal 2004-05. Earlier, the top brass of RBI have maintained that the inflation would be below five per cent level.

This inflation target has been announced “assuming no significant supply shocks and appropriate management of liquidity”. The RBI said in its statement: “Given the ‘pass through’ of international price trends to domestic inflation, the inflation rate during 2004-05 is likely to be influenced to a significant extent by international oil prices and trend in commodity prices”.

Earlier, inflation — as measured by variations in the wholesale price index (WPI) on a point-to-point basis — declined to 4.5 per cent by end-March 2004 from 6.5 per cent at end-March 2003.

The reduction in inflation during 2003-04 reflected lower price increase in primary articles and in the fuel group.

According to the latest available data, annual inflation based on WPI on a point-to-point basis, was lower at 4.2 per cent, as on May 1, 2004 as compared with 6.9 per cent a year ago. However, on an annual average basis, WPI inflation was higher at 5.2 per cent as compared with 3.9 per cent.

The annual inflation rate as measured by variations in the wholesale price index (WPI), on a point-to-point basis, declined from 6.5 per cent at end-March 2003, albeit with intra-year variations, to 4.5 per cent by end-March 2004.

The reduction in inflation during 2003-04 reflects lower price increase in primary articles and in the fuel group. Prices of primary articles (weight: 22.0 per cent) increased by 1.7 per cent as compared with an increase of 6.1 per cent in the previous year. Similarly, there was a lower increase of 2.7 per cent in the ’fuel, power, light and lubricants’ group (weight: 14.2 per cent) as compared with an increase of 10.8 per cent in the previous year. On the other hand, prices of manufactured products (weight: 63.7 per cent) registered a higher increase of 6.3 per cent as compared with an increase of 5.1 per cent in the previous year.