Food inflation has slowed to its lowest in six weeks but there are no cheers, muted or otherwise, being heard in the neighbourhood of North Block. Fuel inflation has raced to an eight-week high, and this doesn’t even take into account the latest increase in the prices of diesel, LPG and kerosene.
With inflation on the verge of return to double digits, fiscal discipline is clearly going to be a casualty with reductions in duty aimed at softening surging prices.
The latest states to respond to finance minister Pranab Mukherjee’s appeal are Maharashtra and Rajasthan, both of which have cut levies on fuel. Prime Minister Manmohan Singh’s target of 6.5% inflation by the fiscal year end now seems to be out of reach. Besides, while fuel has replaced food as the driver of inflation, that could change if rains play truant. The fruits of poor policy choices are here to stay, for a while at least.