The Economic Survey has projected that, barring unexpected shocks, headline inflation would ease to 6.5-7 per cent by the end of this fiscal and moderate further in the coming months although spiralling global crude oil prices continue to pose a challenge.

The Survey expects moderation in inflation to continue during the course of 2012-13 on account of tightening of monetary policy by the Reserve Bank of India and other measures. “By March 2012, headline inflation is expected to fall to 6.5-7 per cent and further moderate in the months ahead, barring ‘unexpected shocks'...” it said.

The Survey noted that since recent geo-political uncertainties were once again putting pressure on crude oil prices globally, representing ‘major risk and challenge' ahead, the “best course of action would be to persist with regular steps — adjustment of domestic energy prices, which would help reduce inflationary pressure and fiscal consolidation efforts”.

The Survey said the gap between wholesale price index and consumer price index inflation had significantly narrowed due to drastic fall in food inflation. Underscoring the need for taking fiscal steps to contain the price spiral as the February data showed inflation hovering above the projected level, the Survey pointed out that with the supply-side factors feeding into food inflation and an uncertain economic scenario in advanced countries, the “task of monetary policy calibration has been particularly challenging”.

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