Inflation is expected to moderate to 6.5-7 per cent by March-end but spiralling global crude oil prices pose a challenge in the coming months, said the Economic Survey for 2011-12.
The Survey, tabled in Parliament by the Finance Minister, Mr Pranab Mukherjee, today also said that inflation would further moderate during the course of next fiscal on account of tightening of monetary policy by the Reserve Bank of India and other measures.
“By March 2012, headline inflation is expected to fall to 6.5-7 per cent and further moderate in the months ahead, barring ‘unexpected shocks’...” it said.
The Survey said that the recent geo-political uncertainties are once again putting pressure on crude oil prices globally which represent a major risk and challenge.
“The best course of action would be to persist with regular steps — adjustment of domestic energy prices which will help reduce inflationary pressure and fiscal consolidation efforts,” it said.
Taking stock of the price scenario throughout the year, the Survey observed that in the current financial year, the gap between Wholesale Price Index (WPI) and Consumer Price Index (CPI) inflation has significantly narrowed due to drastic fall in food inflation.
The headline inflation, after remaining in single digit from August 2010 to August 2011, briefly touched double digits at 10.1 per cent in September 2011 but came down to 6.5 per cent in December 2011.
“The major drivers of food inflation during the current financial year were milk, eggs/meat/fish, gram and edible oils. WPI food inflation (weight 24.3 per cent) has significantly dropped from 20.2 per cent in February 2010 to 1.6 per cent in January 2012,” it said.