New Delhi: Attributing the double-digit inflation to the petrol hike, finance minister Pranab Mukherjee on Wednesday said that prices would moderate by the end of the kharif season, and inflation would come down to 5-6% by the year-end.
“I do feel that the annual rate of inflation will be 5-6% (by 2010-end),” Mukherjee told reporters on the sidelines of a function relating to the setting up of an investment fund between India and Oman.
Wholesale price-based inflation inched higher to 10.55% in June, owing to the pass-through effect of the hike in prices of petroleum products announced on 25 June.
“It is 10.55%. It is hovering around double digits. After the kharif season is over, there will be a moderating impact which is already being felt,” he said.
Inflation figures in June were expected to move up due to the impact of the petro price hike, he added.
The minister had earlier said the fuel price hike would impact WPI inflation by less than a percentage point.
The government had, on June 25, hiked petrol prices by Rs 3.5 a litre while deregulating them, and diesel by Rs2 a litre. Besides this, it raised the price of LPG (cooking gas) by Rs35 a cylinder and kerosene by Rs3 a litre.
The sowing of kharif crops began in June, with the onset of the south-west monsoon, and will continue till September. The crops will start arriving in October.
The Planning Commission said the double digits inflation would decline by December, and sounded optimism that economic growth would exceed 8.5% this fiscal.
Plan panel deputy chairman Montek Singh Ahluwalia said RBI’s monetary steps would be back to normal and monetary actions would not hurt growth.
The Reserve Bank had softened drastically policy to offset the impact of global financial crisis last year.
“Inflation in double digits is not acceptable. You will see inflation coming down by this calendar year-end. Good monsoon will help to bring down prices,” he said.
Inflation, based on movement in wholesale prices is hovering above 10% mark. It was 10.16% in May, and as per the revised estimates, it had exceeded 11% in March.
Inflation figures for June will be out on Thursday and would partly reflect increase in prices of petroleum products.
Agriculture minister Sharad Pawar had earlier said there is likely to be a bumper crop production this year with prospects of good rains. The meteorological department had earlier revised forecast and pegged the quantum of rains for the country for June-September period at 102% of the long period average (LPA).
“I think we would end the fiscal with a GDP growth of 8.5 per cent with upward bias,” Ahuluwalia said.
On IMF revision of growth forecast for Indian economy to 9.5% this calendar year from earlier 8.8%, he said, “For the last five years they have been pitching our growth less than what it was. They are over optimistic.
“We should encourage them to have positive views. IMF talk about calendar year. Our estimate of 8.5 per cent growth is for the fiscal year. They have been quite bullish. They think we can do it.”
When asked about decline in industrial growth numbers to 11.5% in May from 16.52% in the previous month, Ahluwalia said, “I told you that it will come down because of base effect. I think industrial growth would be in double digits this fiscal.”
He said the RBI monetary policy will be back to normal.
“RBI monetary policy is going back to normal. As of now, I don’t think anything is wrong with the RBI policy. I think RBI should make whatever adjustments are necessary. Monetary policy is not a constraint on growth right now,” he added.