Overall inflation declines to 8.5 per cent in October

The Wholesale Price Index (WPI)-based inflation stood at 8.62 per cent in September.
Even as inflation has registered decline it continues to remain much above the tolerable level of 6 per cent as fixed by the Reserve Bank of India.

Analysis of inflation data shows while food inflation remained at high level of 14.13 per cent in October, average price of manufactured items stood at a much low level of 4.75 per cent.

However, manufactured goods, which account for the highest weight of 64.9 per cent in the WPI, stood at a higher level of 4.59 per cent in September.  Though the decline in the overall rate of inflation has brought some solace to economic policy makers Finance Minister Pranab Mukherjee expressed guarded reaction saying supply shortages were still exerting pressure on prices. 

“Inflationary pressure is coming from supply side as well. The apex bank has taken measures to curb inflationary expectation,” he said.  Analysts say RBI monetary actions do not have any role in augmenting supply of goods as they basically alter demand to control inflation.

Unless there is easing of pressure on supply side with enhancement of supply of goods the pressure on prices always remains, analysts said.  Mukherjee, however, refused to specify any further actions that might be taken to control inflation. “You should appreciate that international situation also has its own impact on prices,” he said.

Planning Commission Deputy Chairman Montek Singh Ahluwalia said “inflation has declined. But food inflation continues to remain high. The overall inflation is coming down slowly.”

“The important thing is that food inflation should come down. I hope that it will happen in coming months,” he said hoping inflation would come down to 6 per cent by December end. Prime Minister's Economic Advisory Council Chairman C Rangarajan said “we hope it will come down to 6.5 per cent by December-end and subsequently it may decline further to close to 5.5 per cent by March, 2011.”

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