Government expects inflation to come down

New Delhi/Mumbai: The Centre has expressed confidence that its anti-inflationary measures would stem the spiralling price levels soon, even as more steps could be in the offing. States have also been asked to shoulder a larger role in improving supply side management and prevent hoarding of food products.

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The Finance Minister, P. Chidambaram, said on Tuesday more anti-inflationary steps are in the offing, while the Commerce Minister, Kamal Nath, said measures already taken by the Government will help reduce inflation in coming weeks.

“I don’t see inflation going up; I see it coming down soon,” Nath told reporters on the sidelines of an industry event. He also said that the rise in inflation has been fed by supply-side constraints and that State Governments have been asked to check hoarding and profiteering.

“In controlling inflation we would like to see that State Governments ensure that there is no hoarding and profiteering,” Nath said. He said if there were supply side constraints, “a large part of responsibility also lies on the State Governments. They (State governments) have a mechanism which should be used to ensure that the supply line was not blocked… We are urging the State Governments to play a pro-active role in containing inflation.”

Inflation soared to a 40-month high of 7.41 per cent for the week ended March 29. The Government announced measures such as ban on export of cement, rice and pulses. “I do not know when the Cabinet Committee on Prices will meet; but when it meets, I expect some measures,” Chidambaram said.

The Government’s optimism about a slowdown in inflation during the coming weeks also seems to be based on the fact that the base year WPI reading shows a significant increase for the week coming under review next. The WPI reading for all commodities is up from 210.4 points for the week ended March 31, 2007, which formed the base for the latest reported data, to 211.5 points for the week ended April 7, 2007, which will form the base for the next week. The sharp rise in the base is projected to have a tempering effect on the year-on-year inflation calculations for the next reported week.

Some of the Government’s anti-inflationary measures announced during the first round are also yielding mixed results. Prices of mustard oil, for instance, has fallen 3 per cent to Rs 539 for 20 kg from Rs 556 on April 1, when the Government allowed duty free import of edible oil. On the other hand, soya oil has risen 7 per cent to Rs 600 for 20 kg and groundnut oil went up marginally by 0.82 per cent to Rs 712 for 20 kg.

However, experts also point to worries that actual inflation may be more than what is being reported provisionally, based on consistent upward revisions in inflation data during the past weeks.

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The latest available final data for the week ended February 2, 2008 was reported at 4.74 per cent, way above the provisional 4.07 per cent reported earlier for the same week.

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