Economy

Global commodity prices may fuel domestic inflationary pressures: Survey

New Delhi | Updated on March 12, 2018 Published on February 25, 2011

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The spiralling crisis in West Asia and rising global commodity prices could increase the inflationary pressures at home, the Economic Survey has warned, observing that food inflation has been in double-digit for 76 weeks since June 5, 2009.

“The inflationary pressures on the domestic front are likely to be exacerbated by the higher levels of global commodity prices,” said the Survey tabled by the Finance Minister, Mr Pranab Mukherjee for 2010-11 in Parliament.

It also indicated that the political turmoil in West Asia and the “easy money” policy being followed by developed nations will have a bearing on headline inflation.

Headline inflation, which peaked at around 11 per cent in April 2010, has been on the decline. It was 8.23 per cent in January.

The Survey attributed the decline in inflation to the structural and macro-economic steps taken by the Government and the Reserve Bank of India to combat rising food prices.

“This year, inflation seems to be driven by demand factors, despite higher supply levels,” the Survey said.

This is in contrast to the fact that during the last fiscal, inflation was mostly driven by a deficient monsoon, leading to scarcity of certain food products like pulses, cereals and sugar.

The Survey also pointed to the IMF projections of continued pressure on commodity and non-commodity prices. The West Asian turmoil has already taken global oil prices to a two-year high of over $100 per barrel.

Headline inflation has been over 8 per cent since February 2010.

“The ten-year average of headline WPI inflation was around 5.3 per cent from 2000-01 to 2009-10... In the current financial year (2010-11), the average inflation (April—December) of 9.4 per cent was also much higher than the decadal rate,” the Survey said.

The Government has already said that it expects inflation to moderate to around 5 per cent by June-July.

The RBI has also hiked its short-term lending and borrowing rates six times since April, 2010, to tame inflationary pressure by tightening monetary supply.

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Published on February 25, 2011
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