Friday, February 25 2005 16:36 Hrs (IST) - World Time -

New Delhi: Absolving the Union Government of any blame for shooting inflation that peaked 8.74 per cent in August, the Economic Survey attributed the sharp increase in prices to external factors including global oil prices, bad monsoon and accumulated foreign exchange reserves.

On the contrary, the Survey, presented in Parliament, appreciated the efforts of the Manmohan Singh Government and RBI to stem inflation, but did not hazard a guess on the outlook for 2005-06 in the face of five per cent inflation projections for the current financial year going awry.

"Quick monetary and fiscal measures taken by RBI and Government, coupled with a slight easing of global petroleum prices, inflation has been on a declining trend and stood at 5.01 per cent on February 5 compared to 6.1 per cent a year ago," the survey presented by Finance Minister P Chidambaram said.

Inflation for both manufactured and primary articles were lower at 5.1 per cent and 1.8 per cent respectively as on January 22, 2005, but there was acceleration in inflation for fuel and power group from 7.7 per cent to 10.1 per cent.

It said there was "sudden bout of inflation" in the first half of this fiscal caused by a combination of factors, some exogenous like sharp rise in petroleum prices, deficient rainfall-induced inflationary expectations and monetary over- hang from accretion of forex reserves.

The 52-week average inflation rate in the country was 6.4 per cent till February 5, 2005, higher than 5.5 per cent registered an year ago, the survey said.

However, there is a downward trend of prices particularly for the agro-based products during January-March every year due to seasonality of prices, the survey said, adding, "the current year is no exception to this general trend."

The point-to-point inflation based on Wholesale Price Index (WPI) which was 4.5 per cent on April 3, 2004 and rose to 8.74 per cent on August 28, before sliding since September.

Average annual WPI inflation, which decelerated from 10.6 per cent in the first half of 1990s to 4.1 per cent during 2001-02 to 2003-04, reversed in 2004-05 with pressure on prices across all groups of commodities.

Consumer Price Index (CPI) for industrial workers, which is considered as a more appropriate indicator of general inflation stood at 3.8 per cent in December, 2004, lower than average WPI inflation of 6.7 per cent during the same period.

The lower inflation exhibited by CPI than WPI was mainly because of the food group of commodities having lower than overall inflation and higher weight in CPI than in WPI.

CPI declined significantly from 5.1 per cent in April 2003 to 3.5 per cent in March 2004 and further to 2.2 per cent in April 2004. "Thereafter, CPI inflation started registered an increasing trend reaching 4.8 per cent in September 2004, as WPI inflation pushed up the consumer prices also," it added.