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Price line under pressure

New Delhi, Oct. 10: The rate of inflation is rising once again and has touched 5.03 per cent a fact that could spook the BJP-led government as it prepares for elections in four states in early December.

Economists may not be unduly worried over the fact, considering that it is coming on the back of a robust growth in industrial output in August, which rose 5.2 per cent year-on-year, indicating a revival of the economy, and aided by an increase in consumer demand and a surge in the services sector.

Politicians, however, are not likely to see it in the same perspective and will be worried that the rate of inflation as measured by the wholesale price index for the week ended September 27 has touched its highest level since June.

The worrypot lines will crease further when they learn that inflation surged on the back of higher prices for fruits, vegetables and oilseeds.

No one quite expects to see a replay of the onion fiasco in 1998 that brought the BJP government in Delhi to its knees but they will be hoping that things don't go badly out of hand to give the opposition a handle to batter the government with.

In the previous week, the rate of inflation was at 4.72 per cent and hovered at just 3.28 per cent a year earlier.

During the week ended September 27, the index for food articles rose 0.6 per cent to 184.3 from 183.2 for the previous week due to higher prices of fruits and vegetable, eggs, wheat and pulses, while the non-food articles index inched up 0.8 per cent to 182.1.

However, the index for fuel, power and light remained unchanged at 252.9 after rising recently following a jump in international crude prices.

Analysts, however, said food prices would remain stable until early next year as crop output is expected to rise 20 per cent this year due to a bumper harvest.

Meanwhile, a government statement showed that industrial output in April-August grew 5.6 per cent compared with 5.2 per cent a year earlier. However, the August growth was below July's 5.6 per cent and 6.2 per cent a year earlier.

Manufacturing, which accounts for 80 per cent of the industrial output index, grew 6.0 per cent in August on the back of higher spending, while capital goods clocked a 6.3 per cent rise.

Analysts said the rise is in line with market expectations, for the economy had registered a 5.7 per cent growth year-on-year in the first quarter ended June 30. The government has also upwardly revised its growth estimate for 2003-04, to 7 per cent from 6 helped by bumper farm output and increased infrastructural output.

The farm sector although accounts for a quarter of gross domestic product (GDP) remains a key growth driver as close to 70 per cent of the country's billion-plus population is agriculture-income dependant.

The statement also showed that durables, from television to refrigerators, rose 3.9 per cent and non-durables, such as soaps and shampoos, rose 8.6 per cent.

While the capital goods sector, a barometer for industrial activity, grew 6.3 per cent during the month, electricity inched up 0.9 per cent.

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