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Updated: November 15, 2010 16:55 IST

Food prices still high, says Plan panel

PTI
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Planning Commission Deputy Chairman Montek Singh Ahluwalia
PTI
Planning Commission Deputy Chairman Montek Singh Ahluwalia

Government on Monday said monetary actions by the Reserve Bank of India have helped bring down inflation to 9-month low of 8.58 per cent, though supply shortages are exerting pressure on prices.

The Planning Commission panel has said food prices are still high even as inflation is declining slowly.

“From April 2009 to September 16, 2010, we have increased cash reserve ratio (CRR) by one percentage point. We have increased repo (short term lending) rate by 1.5 per cent”, Finance Minister Pranab Mukherjee said.

He said the reverse repo (short term borrowing) rate has also been increased by 1.75 per cent and “that has some effects,”

The Finance Minister, however, said inflationary pressure is coming from supply side as well.

RBI monetary actions do not have any role in augmenting supply of goods and they basically alter demand to control inflation.

While overall inflation declined to nine-month low, food inflation remained at an elevated level of 14.13 per cent in October, despite moderation from 15.71 per cent in September.

The Finance Minister refused to specify any further actions that might be taken to control inflation and said global situation also impacts prices.

“I will not make any pre-judgement on what action will be taken. International situation has its own impact,” he said.

Analysts said low wheat production in central Asia and rising global commodity prices may again pressure inflation.

Meanwhile, Planning Commission Deputy Chairman Montek Singh Ahluwalia said, “Inflation has declined but food inflation is high. Further decline is necessary”.

Manufactured items inflation rose to 4.75 per cent in October from 4.59 per cent in the previous month.

“It is true that manufacturing inflation has gone up. I am not surprised, if (overall) inflation is heading towards a six per cent level”, Mr. Ahluwalia told reporters.

“The food inflation would sharply decline and inflation in manufacturing sector would rise to average level (5 per cent)”, Mr. Ahluwalia said.

“The important thing is that food inflation should come down. I hope that it will happen in coming months,” he said.

About sticking to his earlier projection of inflation coming down to 6 per cent by December end, he said “it will”.

Keywords: food inflation

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