Monday, July 26, 2010

July inflation seen around 11%: Official

India's headline inflation in July could be around 11 per cent, Chief Statistician of India T C A Anant told reporters on Monday.

Anant also said higher farm production and monetary tightening are needed to tame headline inflation and that he expected prices to cool by November.

The Reserve Bank of India is widely expected to raise its repo and reverse repo rates by 25 basis points each, for the fourth time since mid-March, at its monetary policy review on Tuesday.

"All the measures that the RBI (Reserve Bank of India) has been taking in this regard and may take in the future also, should also have shown by then (third quarter). All this means that you would have softening of prices."

The Prime Minister's Economic Advisory Council headed by former central bank governor C. Rangarajan had said last week that the RBI needs to take strong monetary action to tame high inflation.

Rangarajan said that he expected the central bank to carry out a series of small policy tightening steps.

An improvement in farm output and initiatives by the government to rein in the fiscal deficit would also have an impact on lowering prices, Anant said.

Wholesale price index, India's main inflation gauge, rose 10.55 per cent in June from a year earlier, holding in double digits for the fifth straight month.

Prime Minister Manmohan Singh, who is facing strong criticism over handling of the inflation issue, said on Saturday that headline inflation could come down to 6 per cent by December.

The opposition parties have said they would seek a special discussion and vote in parliament over high prices this week.

But there is little threat to government stability, and the move will only distract from pushing key reform bills in the current session of parliament that began on Monday.

Key policymakers have been saying that food prices will moderate by the end of this year, betting on good monsoons and strong harvest to cool the prices from the high levels touched towards the end of last year, when the worst drought in 37 years hit farm output.

India, Asia's third largest economy, is expected to grow at around 8.5 per cent in the 2010/11 fiscal year.

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