Prices set to rise, but FM predicts mid-July drop
Even as traders warn of a five to 10 per cent rise in the price of essential commodities in Mumbai within the next 10 days because of the fuel price hike, Finance Minister Pranab Mukherjee on Monday said he expects inflationary pressures to ease by mid-July. HT Correspondents report.business Updated: Jun 29, 2010 02:34 IST
Even as traders warn of a five to 10 per cent rise in the price of essential commodities in Mumbai within the next 10 days because of the fuel price hike, Finance Minister Pranab Mukherjee on Monday said he expects inflationary pressures to ease by mid-July.
Mukherjee, who was in Mumbai for a meeting with chief ministers of six states and public sector banks, admitted the hike in fuel rates would directly impact inflation by 0.9 per cent — it's already 10.2 per cent.
"We have taken that risk, there is no doubt about
that," he said, speaking to the media at the state guesthouse, Sahyadri, at Malabar Hill.
However, he added: "Inflationary pressure will moderate by mid-July, particularly food inflation and inflation on primary articles. By year-end, inflation will reduce to a moderate level."
Food inflation, based on the Wholesale Price Index, has touched a high of 16.9 per cent.
Mukherjee said increasing the prices of essential commodities was an "unpleasant decision" but said there was no option because of the revenue losses of the oil marketing companies, a result of the fuel subsidy.
Sharad Maru, president of Grains, Rice, Oilseeds Merchants Association, at the wholesale APMC market in Navi Mumbai, said: "There will be a five per cent increase in the prices of all commodities, including foodgrains and vegetables."
Jayesh Vora, director of APMC, agreed.
"Consumers will be affected as traders will not bear the burden. The rates will increase in the next few days, and the hike will be five to 10 per cent. Pulses will go up by Rs 5 at least and rice by Rs 3-4," he said.
Mukherjee refused to comment on the possible interest rate hike in view of the inflationary build-up. He said the RBI would take the decision in its monetary policy slated for July-end, based on economic data.
Meanwhile, in Delhi, the BJP attacked Congress president Sonia Gandhi for the fuel price hike and announced it would hold a nationwide anti-inflation agitation on July 1, with rallies in all major cities.
Voices of dissent have started emerging within the Congress party itself.
Party leader Anil Shastri dubbed the rise in the prices of kerosene and LPG as "disastrous for the common man" and appealed to Congress president Sonia Gandhi to intervene in the matter.
(With inputs from G Mohiuddin Jeddy)