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Inflationary pressure becoming visible: RBI Deputy Governor

Reserve Bank Deputy Governor Subir Gokarn on Wednesday said inflationary pressure on food and other items is becoming increasingly visible, even as others debate over whether the high rate of price rise will cool from the current level of 9.9 per cent in the next few months.

business Updated: May 12, 2010 21:10 IST

Reserve Bank Deputy Governor Subir Gokarn on Wednesday said inflationary pressure on food and other items is becoming increasingly visible, even as others debate over whether the high rate of price rise will cool from the current level of 9.9 per cent in the next few months.

"...Inflationary pressure starting to become visible. Not just food, but also outside food," RBI Deputy Governor Subir Gokarn told reporters in New Delhi.

Wholesale price inflation touched a 17-month high of 9.9 per cent in March, higher than the RBI projection of 8.5 per cent. Data for April is due to be released on Friday.

Food inflation eased for the second consecutive week ending April 24 to 16.04 per cent as prices of essential items declined on arrival of rabi (winter) crops. The data for food inflation will be out tomorrow.

Many analysts believe that while food inflation will moderate, pressure on manufactured and fuel items will increase due to rising global prices of these commodities.

To contain inflation, RBI had squeezed money supply and made borrowing a bit costlier in its annual monetary policy.

It raised the cash reserve ratio, the amount that banks have to park with the central bank in cash, by 0.25 percentage points to six per cent, besides upping the short term lending and borrowing (repo and reverse repo) by the same percentage to 5.25 per cent and 3.75 per cent.

Earlier in the day, Finance Minister Pranab Mukherjee had said, "I am concerned about the prevailing high inflation in the economy. Inflation erodes real income. It hurts the marginalised, the poor segment of our society the most," he said, adding, however, "I am hopeful that the way the government meticulously planned economic recovery... likewise we would beat the high inflation in the coming few months."

A good monsoon, predicted by the Met Department in its first monsoon forecast, is vital for the economy and would bring down the prices of essential items, Mukherjee said.

Plan head Montek Singh Ahluwalia also said manufacturing and food inflation will be at an acceptable level by August-September.