Even as the prices have started to cool down slightly, producers are still under pressure to pass on the input costs

The much-dreaded rate of inflation, based on the wholesale price index (WPI) for the week ended July 12 eased a tad to 11.89 per cent from 11.91 per cent in the preceding week.
Soaring inflation, which was estimated to cross 12 per cent, gave the government nightmares that still faces the challenge of taming the rising prices of essential commodities.
During the trust vote, prime minister Manmohan Singh had said that controlling inflation would remain as the top-most priority of the government. “Inflation, on a week-on-week basis, has continued to remain stable,” the finance ministry said in its statement.
In the primary articles group, out of a total of 98 articles, 10 articles have shown a decline in prices as compared to July 5, 2008, finance ministry said. These items are fish-marine, chillies-dry, potatoes, oranges, tea, garlic, cardamom, black pepper, maize and cumin.
However, prices of coffee, fruits and vegetables, urad, mutton, arhar, moong and jowar increased, thereby, pushing up the index for food articles by 0.6 per cent.
Even as the prices have started to cool down slightly, pressure on producers to pass on input costs remains heavy. “We expect WPI inflation to peak in October-November, but to stay above 10 per cent until February 2009,” said Sonal Varma, a senior economist with Lehman Brothers.
According to Lehman Brothers, the price of crude would continue to fall to $90/bbl in Q1 2009, which coupled with favourable base effects, will pull down inflation. In the manufactured products group, the index for food products, also rose 0.1 per cent to 211.4 (provisional) from 211.2 (provisional) for the previous week due to higher prices of coffee powder and khandsari, gingelly oil and oilcakes. However, the prices of rice bran oil and imported edible oil, cotton seed oil and groundnut oil declined.
“Inflation is expected to decline for the next couple of weeks. But it will pick up in August and can go up till 13 per cent till December,” said Abheek Baruah, chief economist with the HDFC Bank.