Real inflation has crossed 8.02% already on 15.03.2008 itself!

The provisional data on inflation released at 12 noon on 23.05.2008, though was reported to be 7.82% a tad below over previous week, the revised figures as on 15.03.2008 were reported to be 8.02%, whopping upward thrust by 134 basis points. If we consider the same adjustment to the current provisional figure, the inflation is already 9.16%. The irony is the pass on effect of hike in crude price is yet to be done. The Debt relief scheme announced in the current year budget estimates at Rs.60,000 crores was left uncovered, hoping that the buoyancy in the tax collection and fiscal tightening would take care of it. The same is recently enhanced to Rs.71,000 crores, extending the benefit to large farmers too, upto Rs.20,000/-(maximum) and Pay Commission revision arrears and salary hike to Central Government Employees are other heads add to the expenditure side.

There is heavy pressure from OMCs and Petroleum Ministry on the Government to raise the prices of Petrol/Diesel, which are put on hold by Government, since the inflation is already high, any raise in diesel will fuel it further, and also will have cascading effect on the cost of production, certainly affects growth too. Private retailer Reliance Industries has already shut down all its own retail outlets numbering 1400 adding the burden to PSUs, which are already bleeding due to huge subsidy (difference in pricing compared to market price). Petroleum ministry has suggested number of measures, one of the measures to 'free the pricing of petrol' to market dynamics, which will immediately push the petrol prices by Rs.17/-(being estimated), is not good news to vehicle owners. Crude recently touched all time high of US$135.09 and currently trading around 133, Goldman sachs predicts that it would slowly crawl to 150 and then 200 in an year. If it happens, then there will be high inflation and lower growth in the global economy itself.