Inflation to moderate to 5 per cent: Chidambaram

Finance Minister P. Chidambaram on Thursday expressed the hope that rate of price rise will ease to below 5 per cent following steps taken by the government and the Reserve Bank of India.

“Several steps, including increase in the policy rate, have been taken and we hope that the WPI-based inflation rate will moderate to a level below 5 per cent,” he said at the second South Asian Diaspora Convention here.

Noting that retail inflation has been more intractable, he said both the Wholesale Price Index (WPI) and the Consumer Price Index (CPI) are being driven by food inflation.

“The weights of food items in the two indices are 24.3 per cent and 46.2 per cent, respectively. It may surprise you that there is reasonable stability in the prices of major commodities such as wheat and rice,” he said, adding that sugar prices have actually fallen by about Rs. 6 per kg.

However, he said, prices of fruit, vegetables, meat, milk and eggs are elevated and are driving the inflation rate.

Mr. Chidambaram had earlier said that “both RBI and the government are trying number of measures to cool inflation…

We are looking at various suggestion that we have got. I am open to suggestion but I am afraid that there is no easy answer to cool retail inflation.”

The government has taken several measures including supplying wheat in those location where prices have been high.

So far it has offloaded 500,000 tonne wheat to contain prices.

Meanwhile, RBI has raised policy rate by 0.25 per cent in its October monetary policy review to contain inflation.

The CPI inflation, measured by movement in the retail prices of food items, soared to a seven-month high of 10.09 per cent in October. The wholesale price-based inflation too shot up to 8-month high of 7 per cent in the same month.

Costlier food items, including vegetables, pushed the October wholesale inflation to 7 per cent, highest in the current financial year.

The WPI-based inflation was 6.46 per cent in the previous month. On annual basis, October 2012, it was 7.32 per cent. As per government data, rate of price rise in food articles segment was at 18.19 per cent in October.

WPI inflation has been on the rise for the last few months. While inflation in the vegetable segment stood at 78.38 per cent in October, the rate of price rise in onion continued to remain high at 278.21 per cent.

Protein rich items like egg, meat and fish became dearer by 17.47 per cent in October, as against 13.37 per cent in the previous month.

The data revealed that inflation in the manufactured products had inched up to 2.5 per cent versus 2.03 per cent in September.