Thursday, June 5, 2008

It's gonna be 9 in the near term

 

Inflation may go beyond a 13-year high of 9 per cent as a result of the steepest-ever hike in petroleum prices, analysts said on Wednesday.

"It (inflation) could cross 9 per cent in the near term owing to the hike in petrol and diesel prices," HDFC bank chief economist Abheek Barua told a news agency.

Government today hiked petrol price by Rs 5 per litre, diesel by Rs 3 a litre and cooking gas by Rs 50 a cylinder.

ICICI bank CEO and MD K V Kamath said, "a 10 per cent sustained rise, if passed through, can add as much as 1.3 per cent to inflation."

Inflation was over 9 per cent nearly 13 years back in September 1995.

Petroleum Secretary M S Srinivasan said the hike could lead to an about 0.5-0.6 per cent rise in inflation rate.

Petrol and diesel prices, which have gone up by 11 per cent and 8.5 per cent respectively, will increase the inflation rate by about 0.3 per cent, while LPG cylinder would add 0.2-0.3 per cent to the rate.

Besides, there would be cascading effect of diesel price rise on commodities in due course of time by way of higher transportation cost, adding to the inflation.

A study by CRISIL said the petroleum price hike would push up inflation by 95 basis points through both direct and indirect impacts.

Last week, Finance Minister P Chidambaram had said any increase in administered prices of petrol would have moderate inflationary impact in the short term, but its effect on prices in the long term could not be predicted as there would be a cut in expenditure under some heads as well.

The hike in prices would be reflected in official inflation data slated to be released on June 20.

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