Just a couple of days ahead of the Reserve Bank's monetary policy, Finance Minister Pranab Mukherjee on Wednesday said the government and the RBI together will be able to tackle soaring inflation, which he attributed to global price pressures. “It (inflation) is perilously close to double digit...RBI is also watching the situation like the government and collectively it would be possible for us to tackle the problem,” Mr. Mukherjee told reporters here.
His comments came as headline inflation soared to 9.78 per cent in August, from 9.22 per cent in the previous month, because of rising prices of food and manufactured items. “Of course, in the overall environment, all over the world it was expected that inflationary pressure would rise in all groups including manufacturing (segment),” he said. “This is time of stress not only in India but all over the world and we shall have to maintain our nerves and we shall have to see how we can overcome the problem,” he added.
The RBI is scheduled to announce its mid-quarterly monetary policy review on September 16. It is facing a tough situation of managing a situation of high inflation co-existing with moderation in economic growth.
On the other hand, Chief Economic Advisor in the Finance Ministry Kaushik Basu said there was no black and white answer and the RBI would have to balance between controlling inflation and dampening growth.
Inflation for June has been revised upwards to 9.51 per cent from the provisional estimate of 9.44 per cent, according to official data released on Wednesday. In August, food items on annual basis became expensive by 9.62 per cent, driven mainly by rising prices of onion, fruits and potato. Prices of manufactured products, which have a weight of around 65 per cent in the WPI basket, went up by 7.79 per cent during the month
Among food items, onions became expensive by 45.29 per in August, while fruit prices were up 22.82 per cent. Potatoes became expensive by 12.53 per cent.
Among manufactured items, edible oil became dearer by 12.94 per cent, tobacco product by 13.17 per cent, cotton textiles by 16.86 per cent and wood and wood products by 9.72 per cent. Industrial production fell to a 21-month low of 3.3 per cent in July. GDP growth also slipped to 18-month low of 7.7 per cent in the April-June period.
India Inc has already stated that the rising cost of credit has slowed down investment, thereby hurting growth. This is the ninth consecutive month when inflation has stayed above the 9 per cent mark. Inflation in overall primary articles that have a share of over 20 per cent in the WPI basket stood at 12.58 per cent during the month under review. Non-food primary articles, which include fibres, oil seeds and minerals, became dearer by 17.75 per cent. Inflation in the fuel and power segment stood at 12.84 per cent year-on-year in the said month.