Is the local inflation topping out? Well…..it looks very much likely given the recent moderation in world commodity prices and a slowdown in domestic economic activity would go a long way in ensuring that the horrors caused by the stubbornly high prices could be a thing of the past…at least on the official front.
A latest PIB release states that government is aware that inflation hurts the lower income group of society. Measures taken to contain prices of essential commodities include -- import prices reduced to zero on rice, wheat pulses, edible oils (crude) and onions...,”
In its annual report released on Thursday, the RBI said inflation is likely to stay elevated at least till the third quarter of the current fiscal, before falling to 7% by March 2012.
The minister of state for finance Namo Narain Meena said in a written reply to a question in the Lok Sabha that the impact of inflation is different in urban areas vis-a-vis rural areas. “The impact of inflation on rural and urban areas differs because of the diverse consumption pattern and income distribution,” the minister said further.
While the CPI-rural labourers slipped from 17.35% in January 2010, to 9.03% in July this year, the CPI-industrial workers came down from 16.22% in January 2010, to 8.62% in June 2011.
“In response to the anti-inflationary policies of the government, CPI-RL based inflation has eased to 9.03% in July 2011, from its peak of 17.35% in January 2010,” Meena said.
The headline inflation, as measured by wholesale price index (WPI), has been above the 9% mark since December 2010, and stood at 9.22% in July this year. However, Food inflation stood at 9.80% in mid-August, coming down drastically after hitting highs of around 20% in first half of 2010. The monsson has been good for a second year running and given the slowdown in the latest quarterly GDP numbers, the RBI has much more leeway in coming out of its tight money stance.
Data out yesterday indicated that India’s GDP rose 7.7% in the three months to June compared with 8.8% in the year-ago quarter – its slowest pace in 18 months.
Media reports noted that the government remained cautious about its economic assessment after the data came out. Finance Minister Pranab Mukherjee termed the GDP number "disappointing", his Chief Economic Advisor Kaushik Basu advised against reading too much in the positive entries of the data. "You should not set your hopes too high for the immediate next quarter," he said, adding, "But I do expect growth in third and fourth quarters to show quite a substantial pick-up."
The spate of interest rate hikes by the RBI over the past few months ate into consumption growth, which fell to 6.3% from 8% in the previous quarter and 9.5% in the year-ago quarter.
Have the latest official talks queered up the pitch for a change in RBI’s stance? We will need to keep our figures crossed on that though the inflationary trends would be expected to offer solace for the central bank and local markets in the coming months.