Inflation rate will drop rapidly, predicts Pranab

Finance Minister Pranab Mukherjee today said high inflation was a cause of concern, but it would come down rapidly in the coming months due to a gradual fall in prices of food items.

"I expect inflation based on Consumer Price Index - Industrial Workers (CPI-IW) to decline rapidly as the price of the food items is now declining," he said, addressing a meeting of the Confederation of Indian Industries.

Average inflation based on CPI-IW for the months of February and March 2010 has been about 14.6 per cent, he said, adding that retail price based inflation is higher mainly because food items make up most of the index basket.

Food inflation, based on wholesale prices, had scaled 20 per cent in December, but has since declined to around 16 per cent due to arrival of fresh crops in the market. The annual overall inflation was at 9.9 per cent in March.

The government has taken a host of initiatives to deal with rising prices, Mukherjee said, adding, "Inflation erodes real income. It hurts the marginalised and the poor segment of our society the most. "I am concerned about prevailing high rate of inflation."

The finance minister was buoyant about the economy's growth prospects in the current fiscal and said the Gross Domestic Product would increase to 8.5 per cent.

"I expect strong growth with the further improvement in business confidence," he said, adding that he hoped that the country would exceed the growth projected by the International Monetary Fund.