Rail Budget 2012: Inflation rises to 6.95% in February

Inflation rose to 6.95 per cent in February because of sharp increase in food prices, especially vegetables and protein-based items.

Inflation, as measured by the Wholesale Price Index, was 6.55 per cent in January.

In February last year, it was 9.54 per cent.

As per the official data released on Wednesday, food inflation was 6.07 per cent in February against (-)0.52 per cent in January.

Pulses turned expensive by 7.91 per cent and vegetables by 1.52 per cent during February. Prices of vegetables had declined by 43.13 per cent in January.

Besides, egg, meat and fish prices rose 20 per cent during the month, from 18.63 per cent in January.

Milk became expensive by 11.70 per cent, while rice and cereals turned costlier by 1.53 per cent and 1.71 per cent respectively.

However, prices of potato and onion declined by 2.22 per cent and 48.50 per cent year-on-year in February.

Food articles have 14.3 per cent share in the WPI basket.

Prices of manufactured items, which have a weight of around 65 per cent in the WPI basket, went up by 5.75 per cent year-on-year in February, as against 6.49 per cent in the previous month.

The headline inflation numbers for December was revised upwards to 7.74 per cent, from the provisional estimate of 7.47 per cent.

Inflation in manufactured items has been high since February 2011, when it crossed the 6

per cent mark.

Among manufactured items, iron grew dearer by 15.82 per cent and edible oil prices rose by 7.57 per cent, year-on-year.

The cost of tobacco products moved up by 10.10 per cent and basic metals became 10.44 per cent expensive.

Inflation in overall primary articles was 6.28 per cent in February on annual basis. It was 2.25 per cent in January.

Non-food primary articles, which include fibres and oilseeds, showed moderation to (-)2.56 per cent in February.

In January, inflation was 0.55 per cent.

Inflation in the fuel and power segment was 12.83 per cent on an annual basis. The rate of price rise was 14.21 per cent in the previous month.

Experts said the rise in inflation, driven by prices of food articles, will keep the pressure on the government to remove supply side bottlenecks.

Headline inflation was near double digit for most of 2010 and 2011.

The apex bank hiked key policy rates 13 times, totalling 350 basis points between March 2010 and October 2011 to tame inflation.

Although RBI has resorted to injecting liquidity of Rs 48,000 crore (Rs 480 billion) into the financial system, by reducing cash reserve ratio for banks, it has also called for fiscal steps by the government to combat inflation.

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