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Expect 8.5% inflation before dip: plan panel

All speculation can come to rest with the Planning Commission estimating that inflation will come down to 3.5 per cent only by March next year, reports Chetan Chauhan.

business Updated: May 24, 2008 00:38 IST
Chetan Chauhan

All speculation can come to rest with the Planning Commission estimating that inflation will come down to 3.5 per cent only by March next year.

In the commission’s internal assessment, the inflation is expected to rise to 8.5 per cent in the next three months, before it starts to come down. The inflation this week was pegged at 7.82 per cent from 3.7 per cent at the beginning of 2008.

Planning Commission Deputy Chairperson Montek Singh Ahluwalia had earlier this week said at a function in Delhi that inflation would come down in the next three to four months. “Given a certain amount of patience, inflation will come down in three-four months. Prevailing uncertainities in the economy would have resolved themselves by the end of 2008,” he had said.

The commission’s assessment is that after the monsoon, inflation will start falling with the influx of food items in the domestic market and some respite in the international food market.

Till the monsoon ends, the government will have also strengthened its buffer zone of wheat and rice with additional procurement from the market, thereby providing stability to the volatile domestic food market, the commission had said.

The commission believes that by the time the government will present vote on account in Parliament next year because of general elections, the pressure of inflation would have eased out. “The estimate of 3.5 percent inflation is on the basis of our expectation that agriculture production would rise to over three percent, thereby providing relief,” a commission official said.

The UPA government can expect inflation to hover around five percent during winter when preparations for the next general elections would be on full swing. The commission’s estimate can provide some respite to the UPA government, which is facing heat for rising inflation in the past few months.