Inflation will slow by March, says Pranab; opposition flays claim (Roundup)

November 22nd, 2011 - 8:48 pm ICT by IANS  

Pranab Mukherjee New Delhi, Nov 22 (IANS) Finance Minister Pranab Mukherjee said Tuesday inflation would come down to 6-7 percent by the end of the current fiscal and to a “more acceptable” level in the next 6 to 12 months.

Opposition parties, however, reacted sharply to the projection, with main opposition Bharatiya Janata Party (BJP) warning that sharp rise in prices of essential commodities might become a cause of violence in the society.

Making a suo motu statement on inflation in the Lok Sabha, Mukherjee claimed there has been a steady improvement in the situation and the policy initiatives would help “bring down the inflation rate to more acceptable levels in the next 6 to 12 months.”

“Government is committed to bring down inflation to more acceptable levels. I hope to see the March-end inflation between 6 to 7 percent,” he said.

The finance minister said the government has taken a number of fiscal and monetary measures to address the issue of demand-supply mismatch, the main reason behind general price rise.

Overall inflation has remained stubbornly high, near double digits, since January 2010. Headline inflation based on the wholesale price index was recorded at 9.73 percent in October. Food inflation was recorded at 10.63 percent for the week ended Nov 5, according to the latest official data.

Inflation rate in the range of 4-5 percent is considered a comfortable level for the developing economies like India.

Slamming Mukherjee’s statement, BJP leader and former finance minister Yashwant Sinha said while the opposition parties had no hope from the government, now people were also losing hope.

“We are disappointed with the finance minister’s reply… There is no ray of hope. The government remains totally paralysed even today with regard to inflation,” Sinha said.

Sinha said the government was “not ready to recognise inflation as a problem for aam aadmi (common man)” and it will not be surprising “if price rise becomes a cause for violence”.

Communist Party of India-Marxist (CPI-M) leader Sitaram Yechury said people were not convinced by the government’s assurance as it had miserably failed in its previous projections.

“Nothing has happened” despite the assurances by the government in the past parliament sessions to protect the common man from the rise in prices of essential goods, Yechury told reporters.

The finance minister said inflation has remained stubbornly high, almost double the comfortable level, for the last two years due to a combination of domestic and global factors.

Mukherjee said macro-economic policies, especially the fiscal stimulus, by the developed countries in the post-global financial crisis have created the problems of inflation management in the developing countries.

The finance minister said sustained high economic growth in recent past has led to improvements in purchasing power in both rural and urban areas, leading to demand-supply mismatch.

He pointed out that crude oil and other commodity prices have remained high despite a slowdown in the global economy.

“Despite weak prognosis of global growth and trade in the short to medium term, international commodity prices have not softened at the anticipated pace. For example, crude oil was around $75 a barrel in January 2010, but on an average continues to be around $110 in the current year,” he said.

“Speculative activity in commodity markets and some supply disruptions in fuel oil, like in Libya, have kept the commodity markets tight,” he added.

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