More worrisome was the spurt in the revised inflation figure at 7.78 per cent for the week ended March 8 from the provisional 5.92 per cent as it only revealed that the initial data on the price spiral was grossly underestimated.

With this, the government appeared to be in a tizzy. For, while the depreciating rupee in recent days would erode the effect of the fiscal measures and lead to import of inflation, the government would also have to make a choice between addressing the growth slowdown and spiralling prices, especially when crude oil prices have been touching new highs.

Concerned over the runaway increase in prices, Finance Minister P. Chidambaram warned steel and cement producers of more administrative steps if the rollbacks announced by them were found not enough to hold the price line.

“As I said, we are waiting for steel and cement [prices] reductions to come into force, but we always reserve the right to take administrative measures if they are not enough. But for the time being, we simply have to remain a little patient,” he said on the sidelines of a FICCI function here.

Steel and cement are the two core sector industries that together account for about 12 per cent of the overall inflation as measured by the wholesale price index. Finance Minister said “if steel and cement [price cuts] kick in, there is still expectation that inflation will moderate.”

For the week ended May 3, even as the inflation soared to nearly a four-year high, the data revealed that iron and steel prices had declined by 1.7 per cent and cement by 0.4 per cent. He said the surge in prices was “indeed worrying”, but the fall in inflation rate in the primary articles group was “a silver lining amidst dark clouds.”

As for the price pressure in the fuel, power, light and lubricant category, he said: “Unless crude prices decline, I am afraid, we are stuck with high inflation in that group.” <<back