The government on Tuesday said there are sure signs that inflation is coming down, even as macro-economic managers grope for options to cool prices and sustain growth.
“High food prices, caused in part by severe drought conditions last year and higher global food prices, have been driving higher inflation in India,” said the finance ministry’s mid-year analysis, tabled in Parliament on Tuesday.
More-than-normal rainfall, critical for the country’s summer-sown crop, has sharply boosted crop yields this year.
As a result, food price inflation, which had breached the 20%-levels, has dropped to single-digit levels and is headed further south, and overall headline inflation, as measured by the wholesale price index (and by all the consumer price indices), is also correspondingly lower, it said.
The Reserve Bank of India (RBI) has raised key policy rates several times this year as focus shifted to taming prices that had reached worrisome levels.
“Steady reversing of earlier easing of monetary policy has helped simultaneously to curb demand-side inflationary pressures,” it said.
“My forecast for overall inflation for November is 7.5 %,” chief economic advisor Kaushik Basu told reporters after the tabling the analysis in Parliament.
Strong demand in the economy had also fanned prices of several manufactured goods pushing the overall inflation rate to 11% in April. It has since fallen to 8.58% in October.
“Inflation is coming down. Now it is at the single digit but I would like it to be further reduced,” finance minister Pranab Mukherjee said. “I am hoping that by March it would be around 6%, but it should come down further.”
The analysis attributed the deceleration in inflation to a slew of policy measures taken by the government and the RBI “to douse inflationary expectations and pressures.”
It said since the beginning of the current fiscal, double-digit inflation has been observed in non-cereal food items as well as non-food articles like minerals and mineral oils.