Inflation Will Ease By April (09-Mar-2010)
The government is in a tight spot by its allies and opposition parties alike due to the concerns over food inflation.
But, however, chief economic advisor Kaushik Basu came out supporting the government saying that food inflation will moderate by April.
Meanwhile, he said that food inflation is a root cause for concern but is banking on a better rabi crop.
He added that the food inflation is on a sluggish downward trend and it would have been more visible if there wasn''t this base effect.
The fuel price increase doesn''t help and it could lead to a spike in the wholesale price index by almost 400 basis points in the short term.
But, however, in the long term, he aid that he expects the lower fiscal deficit to reduce inflationary pressures.
Moreover, he also says an annual inflation figure is a better indicator of where the economy is headed and if you look at the WPI, now it is 8.5%.
But, he said that for the year as a whole, it will not be over 4% as we have had many months of negative inflation earlier.
The other reason for the spike in food prices is that wholesalers and retailers see no incentive in reducing food prices once they''ve hit the roof.
Thus even though the drought is behind, horticultural output was better than last year and shortfalls have reduced and the overall impact on consumer prices is not apparent.
On the other hand, the government is banking on a good rabi crop, but cropping estimates will provide a better picture of whether food prices will come down any time soon.
Meanwhile, Montek Singh Ahluwalia, the deputy chairman of the Planning Commission said that India''s food and aggregate inflation would ease over the next two months.
He added that he would not hazard a guess on end-March inflation projections.
But, however, he would expect food and aggregate inflation to trend down over the next two months.
Earlier, the government stated that the tax proposals introduced by Finance Minister Pranab Mukherjee in his Budget for 2010-11 will marginally stimulate inflation.
But, however, it would not put any pressure on interest rates.
Finance Secretary Ashok Chawla stated that they don''t see pressure on interest rates from fuel price hike when he was asked if the rise in inflation would put pressure on interest rates.
The FM had said that hike in the petroleum prices from February 27 would lead to 0.41% hike in inflation.
Previously, the Economic Survey on Feb 25 cautioned that the total prices would rise further in the next few months.
It also partially blamed poor food management policies for double-digit food inflation.
Meanwhile, higher food prices were primarily due to the supply-side constraints, compounded by poor monsoons in 2009.
Earlier, as prices of pulses and vegetables eased during the week, food inflation declined to 17.58% for the week ended February 13.
The wholesale price-based inflation declined after rising for 4 consecutive weeks.
Inflation was at 17.97% in the previous week.
Additionally, Food inflation increased marginally to 17.97% for the week ended February 6 due to the rising prices of potatoes and onions.
The wholesale price-based food inflation rose for the fourth consecutive week where ithe previous week it stood at 17.94%.
Potato prices were up 57.67% from last year''s level, while onions were dearer by 29.92%.
The inflation for primary articles, which include food and non-food items in raw form, rose to 16.23% during the week from 15.75% a week earlier.
The price index for food articles moved up 0.1% due to higher rates of moong and poultry chicken (3% each), while rates of fish marine rose by 2% and barley and wheat became costlier by 1% each.
Earlier, the Reserve Bank of India stated that it would abide by with its projection of inflation standing at 8.5% by the end of the current fiscal.
This they will do even as rate of price rise has already breached the central bank''s target.
RBI said that monitoring inflation is a continuous process and they still stand by that inflation will be at 8.5%, as projected, by March 2010.
Top News Today
 Reliance Power, the Anil Ambani group company's 2,400-MW Samalkot plant in Andhra Pradesh is likely to be ready for electricity generation this fiscal. It will install six gas turbines at the plant having
 CMI FPE, one of CMI Industry's Indian subsidiaries, has entered into a new agreement with Indian steelmaker Bhushan Steel for the supply of seven major steel processing equipments. All these equipments
 NIIT Technologies, the global IT solutions provider has successfully deployed its cargo operations intelligent system (COSYS), a complete cargo management platform, to manage cargo handling operations
|
International Stock News
 The US markets made a mix closing on Thursday, as a drop in jobless claims fueled optimism about the economy and investors looked to the next day's employment report as the next indicator of the economic
 The US markets made a mixed closing on Tuesday, with the indices mostly slipping after US economic data failed to live up to expectation. The reports showed that American consumer confidence trailed estimates
 The US markets closed lower on Monday, as leaders in Europe gather to discuss the debt crisis for the seventeenth time in two years and tensions remained high with Portugal’s soaring borrowing costs. On
|
|
|