Inflation may be much higher

Inflation, as indicated by latest Government data, may be understated and the rate of price rise could be higher than eight percent as global prices of a number of commodities have not been accounted for, say leading economists from HDFC Bank and Crisil.

As per the latest preliminary figures, inflation stood at 7.83 percent for the week ended May 3. The last revision of inflation numbers saw it touching 7.78 percent against the provisional figure of 5.92 percent for the week ended March 8, up by 1.86 percent.

It is possible that the revised data against the provisional figure could move up to 8 percent or a tad higher than that, as revised figures for March and April are likely to go up because prices of a number of commodities were recorded lower than the global prices, HDFC Bank Chief Economist Abheek Barua said to the news agency.

During the UPA regime, highest rate of inflation was 8.74 percent (revised) for the week ended August 28, 2004.

Conforming to the view, Crisil Principal Economist D K Joshi said the sharp upward revision would continue for the next 4-5 weeks and the revised data could touch 8 percent.

Explaining the rationale for the spurt in the revised figure, Joshi said prices of variety of commodities were updated leading to sharp difference between provisional and final figures.

Some of these commodities are metals, edible oil and raw cotton, Barua said, adding that there were gaps between international prices and domestic prices.

This could again be reflected in the revised inflation figure for the week ended March 1, for which the provisional figure was 5.11 percent, updated to 6.21 percent, an increase of 1.1 percent. Thus, for the first two weeks of March, the revision was over one percent.

During 2008, of the 11 revisions, the change from provisional to final has been more than 0.5 percent in 10 cases.

Till the week ended February 23, the revisions were less than one per cent, but thereafter it jumped to over one percent.

Barua said post-April data were better captured and the gap between provisional and final are likely to come down.

Speaking on price rise Prime Minister Manmohan Singh said on his way back to India from Bhutan, "If weather gods cooperate, we would see moderation of inflation after September 15."

"We have taken adequate measures. We have had excellent procurement of rice and wheat. We have taken effective steps. We are hopeful of moderation over the next few weeks," he said.

Singh said there is always a rise in prices between May and September.