Inflation dips to 3.13%

The policies of the UPA government and Reserve Bank in the last 15 months have paid off, with inflation falling to a new low of 3.13 per cent -- the lowest at least in the last three years, although surging global oil prices posed a major threat to domestic prices.

Fall in inflation was not only due to prudent money supply management by RBI, dip in prices of manufactured items, minerals and some farm products, but also on account of "base year effect" as price level was as high as 8.29 per cent a year ago.

However, low inflation is unlikely to be sustained as policymakers -- Finance Minister P Chidambaram, Petroleum Minister Mani Shankar Aiyar and Planning Commission Deputy Chairman Montek Singh Ahluwalia have made a strong case of another round of hike in domestic fuel prices considering the increasing losses of oil PSUs.

So, it is just a matter of weeks for another round of domestic fuel price hike considering the spiralling of global oil prices at over $67 a barrel owing to massive global demand and production problems in US refineries.

While expressing concern on surging global crude prices, Chief Economic Advisor in Finance Ministry Ashok Lahiri indicated that inflation may not be affected to a great extent even if domestic fuel prices are hiked in due course of time.

"If you look at the weightage of petroleum products in WPI, it is less than 3 per cent. So you can work out the impact of domestic price hike on inflation," he said. However, the snowballing effect of a possible diesel price hike on essential items cannot be ruled out.

WPI remained unchanged at previous week's level of 194.1 points but was higher than 188.2 a year ago.