Inflation eases to 9.22 % in July

Headline inflation eased to its eight-month low at 9.22 per cent in July from 9.44 per cent in the previous month but that is unlikely to bring any cheer in the months ahead as prices of both edibles and manufactured products continue to rule at higher levels.

With the moderation in WPI (Wholesale Price Index) headline inflation during July — the previous low point was 8.20 per cent in November, 2010 — Finance Minister Pranab Mukherjee hoped that the government and the Reserve Bank working together would lead to a further cooling of the price spiral in the coming months.

On the contrary, however, Chief Economic Advisor Kaushik Basu viewed that headline inflation might remain at elevated levels and even rise further to near double digits in August before tapering down later during the year. In effect, the high inflation would prompt the RBI to continue with its tight-money stance during its monetary policy review in September.

Commenting on the WPI data, Finance Minister Pranab Mukherjee said: “Inflationary pressure is in the system and we shall have to make efforts to have the inflationary pressure at an acceptable moderate level for which we are working in tandem with the RBI.”

Alongside, however, Mr. Mukherjee felt that a good monsoon coupled with the ongoing monetary policy stance would lead to a moderation in prices. “I am quite confident that a good monsoon will ensure moderation of inflationary pressure. The measures taken to remove supply constraints in some of the agricultural products and the monetary policy adopted by the RBI will help bring about moderation of inflationary pressure...,” he said.

Ruling out any respite from high prices in the coming months, Dr. Basu said: “By our calculation, there are still a couple of more months of relatively same level of inflation [as in July] will be roughly where we are, we are expecting till December. After that we do expect some sharp decline in inflation. In fact, inflation could climb a little bit next month...”

Planning Commission Deputy Chairman Montek Singh Ahluwalia felt that despite the decline, overall inflation was still on the high side. “There is slight decline in inflation. It is still on high side. We have to be vigilant. It's good that it is gradually declining,” he said.

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