Inflation to average 5 pc in FY10: Assocham

Inflation may have turned negative, but will start rising after three months to average 5 per cent this fiscal as commodities turn expensive in global markets and soft monetary and fiscal policies firm up prices, a study by Assocham said.

Inflation may have turned negative, but will start rising after three months to average 5 per cent this fiscal as commodities turn expensive in global markets and soft monetary and fiscal policies firm up prices, a study by Assocham said.

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The surge in international commodity markets led by energy, metals and food is likely to push the domestic prices up once the fiscal and monetary measures taken in response to the crisis starts to firm up the economic activity, it said.

"If it was the imported inflation phenomenon which took the WPI-based inflation to average 8.5 per cent last fiscal, a rebound in commodity prices aggravated by poor monsoon would lead WPI inflation to average near 5 per cent this fiscal," Assocham Secretary General D S Rawat said.

The study, however, said the negative inflation phenomenon is likely to continue for 10–12 weeks due to high base of the index as crude oil prices peaked at USD 147 per barrel in July 2008.

Inflation for the week ended June 13,2009, was minus 1.14 per cent while it was minus 1.61 in the previous week.

Considering that India imports over 75 per cent of its crude oil requirement, pick up in the crude oil prices would fuel inflation, the chamber said. The crude oil prices have increased from a low of USD 33.87 per barrel in mid-December to nearly USD 70 per barrel.