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Food inflation plunges to 4-year low of 1.81% for week ended 10th Dec

This is the lowest rate of food inflation since the week ended 9 February 2008, when it stood at 2.26%, government data showed

New Delhi: Food inflation fell sharply to a near four-year low of 1.81% for the week ended 10th December as prices of essential items like vegetables, onion, potato and wheat declined.

This is the lowest rate of food inflation since the week ended 9 February 2008, when it stood at 2.26%, reports PTI.

Food inflation, as measured by Wholesale Price Index (WPI), was 4.35% in the previous week. It had stood at 13.22% in the corresponding week of 2010.

According to the official data released today, onion became cheaper by 49.38% year-on-year during the week under review, while potato prices were down by 34.39%.

Prices of wheat also fell by 4.21%.

Overall, vegetables became cheaper by 26.37%.

Experts feel the sharp fall in food inflation numbers, which was in double-digit till the first week of November, comes as a big relief to both the government and the Reserve Bank of India (RBI) who have been battling high prices for over two years.

However, other food products grew more expensive on an annual basis, led by protein-based items.

Pulses became 14.22% costlier during the week under review, while milk grew dearer by 11.19% and eggs, meat and fish by 9.25%.

Fruits also became 8.89% more expensive on an annual basis, while cereal prices were up by 1.68%.

Inflation in the overall primary articles category stood at 3.78% during the week ended 10th December, as against 5.48% in the previous week. Primary articles have over 20% weight in the wholesale price index.

Inflation in the non-food segment, which includes fibres and oilseeds, was recorded at 1.37% during the week under review, as against 2.12% in the week ended 3rd December.

Fuel and power inflation stood at 15.24% during the week ended 10th December, same as in the previous week.

Headline inflation, which also factors in manufactured items, has been above the 9% mark since December 2010. It stood at 9.11% in November this year.

The RBI has hiked interest rates 13 times since March 2010 to tame demand and curb inflation.

In its second quarterly review of the monetary policy last month, the central bank had said it expects inflation to remain elevated till December on account of the demand-supply mismatch before moderating to 7% by March 2012.

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Steel lost sheen as the year progressed: 2011 Review

The year ahead also does not hold much promise unless the governments take concrete steps to boost consumption of steel in the domestic market, particularly in rural areas. Experts say that the country and the steel makers have to make sincere efforts to develop better technology in-house

New Delhi: Entering 2011 on a strong note amid buoyant demand from construction, consumer durables and automobiles, the steel sector lost its sheen as the year progressed, impacted by inflation, high interest rates and rising input costs, reports PTI.

It was on 5th January that credit rating agency Fitch predicted 7%-9% demand growth for steel in 2011, supported by an expected spurt in consumption by automobiles, white goods and construction sector.

The government’s continuous thrust on infrastructure spending fuelled expectations were bolstered by steel makers reporting strong topline growth in the January-March quarter. JSW Steel clocked 34% growth, Tata Steel, 18% and SAIL 7%. Bottomlines also showed remarkable growth that quarter.

However, even before the end of March quarter, an element of uncertainty started creeping in. Steel makers as well as the policymakers were virtually clueless on the likely demand and movement in the price of coking coal, an important raw material for making of steel.

Already hardening, coking coal prices shot up to a record high of $330 per tonne during April-June, from $200 a year ago due to paucity of supply in the global markets on account of a major flood in Australia’s Queensland province, a major international supplier.

India’s steel sector was then set to take a major hit as the slowing global economy began taking its toll on demand in Europe and the US. The Greek debt crisis and its spill-over to the Eurozone eroded demand further in the following months.

The writing on the wall became clearer.

Indian steel makers had to start living with costlier raw materials throughout the year, with margins shrinking. They weren’t able to pass on the inflated cost to the customers.

The ‘New Year’ euphoria faded.

For the April-June quarter, SAIL reported 29% dip in net profit over the same quarter last year bearing the burnt of ‘red-hot’ coking coal price, which alone inflated its expenditure on raw material by Rs588 crore. SAIL’s turnover grew 19.7% to Rs11,891 crore over a year-ago period.

Steel makers started pinning hopes on the moderation of coking coal prices as output in Australian mines showed sign of stabilising. They also hoped for a pick up in domestic steel demand after the monsoon.

Instead, demand remained subdued, coking coal price did not decline, interest rates continued to hardened, the rupee depreciated and the bottomline of steel makers went from bad to worse in the next three months.

SAIL clocked 55% decline in net profit at Rs495 crore and JSW Steel reported a Rs669 crore loss. Tata Steel Group’s net profit came down to Rs212 crore from Rs1,979 crore in the corresponding period of last year.

Towards July-end, the Supreme Court banned mining in the Bellary region of Karnataka citing environmental degradation.

JSW Steel was the worst hit. It had to cut down production to 70% cent of its installed capacity.

Contrary to expectations of the initial months, domestic steel consumption grew by 2.9% during April-October period to 39.5 million tonnes, pulled down by sluggish growth, interest rate hikes and stubborn inflation.

The country’s steel production in the first 11 months of 2011 stood at 66 million tonnes, up 5.6% from 62.5 million tonnes during January-November period of last year.

It was not only the performance of steel firms which impacted sector. There was been no major movement on the policy front either, barring the raising of export duty on iron ore.

The National Steel Policy is yet to take final shape.

Except for brownfield expansions, no greenfield plant has gone on stream.

The year ahead also does not hold much promise unless the governments take concrete steps to boost consumption of steel in the domestic market, particularly in rural areas.

Experts say that the country and the steel makers have to make sincere efforts to develop better technology in-house.

According to them, unless that is done, Indians will continue to look for foreign collaborations where their partners will dictate terms, like in the case of SAIL-Posco joint venture; and steel firms would have to play second fiddle to them.

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