Inflation to hover at 4-5% by end 2009, says Montek

“We are in favour of modest inflation; we (will) end the year, as we have been saying, with inflation between four and five per cent,” Ahluwalia said.

Asked about inflation going up marginally to (-)1.21 per cent for the week ended July 4 compared to (-)1.55 in the previous week, Ahluwalia said, “I have been saying consistently that temporarily inflation will be negative but it will go back to a positive level. Inflation should be small but positive ... negative (inflation) ... falling prices are bad for the economy.”

Turning positive

“(Very high individual prices coming down) is ok, but for the price level as a whole (it) is not good. Inflation between four and five per cent is normal,” he added. 

About when inflation is expected to turn positive, he said, “Three weeks ago I said it would remain negative for several weeks, but I am not predicting when it is going to be positive.”

Meanwhile, driven by higher prices of fuel items like petrol and diesel, inflation rose marginally to (-)1.21 per cent for the week ended July 4 against (-)1.55 per cent in the previous week.

At the same time, prices of food articles like cereals, pulses, spices, and fruit and vegetables also remained firm. The wholesale price index during the corresponding week a year ago was as high as 12.19 per cent.

During the week, food items like coffee turned expensive 15 per cent, maize 2 per cent, and condiments and spices by 1 per cent. Besides, prices of coffee powder rose 7 per cent, and ghee and sugar one per cent each.

Inflation for the week ended May 9 was revised upwards to 1.56 per cent from 0.61 per cent as estimated provisionally.