Inflation dipping but take care, warns economic survey news
15 March 2012

The pre-budget economic survey for 2012-13 sees the wholesale price index (WPI) showing signs of moderation after remaining persistently high throughout 2011 due to increasing global commodity prices and high crude prices.

The WPI, a key gauge of inflation, is expected be at 6.5 to 7 per cent by March 2012, the government's annual macroeconomic stocktaking report said.

Inflation may further moderate during 2012-13 due to tightening of monetary policy and other measures put in place by the government. Taking stock of the price situation, the Economic Survey 2011-12 has observed that in the current financial year the gap between WPI and CPI (consumer price index) has significantly narrowed due to a considerable fall in food inflation.

The survey says that the major drivers of food inflation during the current financial year were milk, eggs, meat, fish, gram (pulses) and edible oils.

WPI food inflation (weight 24.31 per cent) has significantly dropped from 20.2 per cent in February 2010 to 1.6 per cent in January 2012, mainly on the back of seasonal fall in fruit and vegetable prices and a good harvest leading to lower inflation in cereals.

The survey comments that the objective of monetary policy during 2011-12 has been to rein in inflation and contain inflationary expectations. With supply side factors feeding food inflation and an uncertain economic scenario in developed countries, the task of monetary policy calibration has been particularly challenging.

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Inflation dipping but take care, warns economic survey