Inflation will remain above seven percent: Ficci survey

June 22nd, 2008 - 7:04 pm ICT by IANS  

New Delhi, June 22 (IANS) Inflation will remain at over seven percent till the year-end, says a survey by a prominent Indian industry lobby that attributes the trend of rising prices to external factors beyond the control of domestic monetary policy. “Rising oil prices, commodity prices and food prices are a global phenomenon and these cannot be influenced through the monetary policy,” said the Federation of Indian Chambers of Commerce and Industry (Ficci), which studied inflationary expectations in the Indian industry.

Inflation touched a 13-year high of 11.05 percent for the week ended June 7. “It is therefore important that the authorities take a relook at the anti-inflationary package,” it pointed out.

The Ficci survey showed that there was a strong feeling among members of the Indian industry that inflationary pressures would remain. Nearly 68 percent of the respondents felt the current inflation rate would be either maintained or would further increase over the next six months.

While 38 percent of the respondents felt that inflation would continue to be in the range of seven to eight percent six months from now, 19 percent felt the inflation rate would be in the range of eight to nine percent.

About six percent of the survey participants felt that inflation would be in the range of nine to 10 percent in six months from now.

“These results can be interpreted as an acknowledgement of Reserve Bank of India’s tight monetary stance and of a further tightening of monetary policy in the near term given the present inflationary situation,” said Ficci.

Ficci said the industry was under pressure owing to the rise in prices of raw materials, oil and oil products, power, wages and salaries and also the rising burden of interest on borrowed sums.

“All these factors together have put a huge dent on the margins and on the operating performance of companies, forcing many of them to partially offset this pressure through an increase in prices,” Ficci said.

Given the present situation on the inflation front, Ficci feared that interest rates would remain high and possibly go even further.

Citing the slackening pace of manufacturing sector growth, the majority of industry members felt that interest rates should be brought down.

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