New Delhi, Aug. 16: Inflation, which measures the pace of rise in prices fell to single digit in July to 9.97 per cent after a gap of five months.
The downfall in the inflation was on account of decline in food inflation and fall in the prices of some manufacturing products like cement,” said Crisil chief economist, Mr D.K. Joshi. He said that the inflation is near its peak and there is not much upside left. “There will be marked decline in inflation in September-October which is the harvest period,” said Mr Joshi.
Mr Tushar Poddar, vice-president and chief India economist, Goldman Sachs, said that inflation has peaked and will trend down gradually as the base normalises to under 6 per cent by end-FY11. Inflation was at 10.55 per cent in June.
The finance minister, Mr Pranab Mukherjee, also raised hope that inflation would come down even further. “Policy rates had some impact (on the decline of inflation) but there are also base factors,” said Mr Mukherjee. He attributed the downfall in inflation of food items to seasonal factors “particularly in respect of some food items like fruits, vegetables and milk”.
However, analysts don’t expect the fall in inflation to have any impact on the tightening of monetary policy adopted by the RBI.
Citi India said that given trends in both macro and sectoral indicators, it expects a further 50 basis points rate hikes in 2010. “While monetary tightening can control inflation to some extent such a tightening beyond a certain point will put brakes on growth of the Indian economy and that will have cascading effect on un-employment,” said Mr Siddharth Shankar, director, KASSA.