When it comes to inflation, emollient words are never far behind the bad news.
Food inflation rose to 10.05% on a year-on-year (y-o-y) basis for the week that ended on 20 August. The chairman of the Prime Minister’s economic advisory council, C. Rangarajan, said a good monsoon will ensure that food prices will cool down.
That may be so, but given the generalized nature of inflation— prices of manufactured non-food items have remained hard in recent months; this component of the Wholesale Price Index rose by 7.5% (y-o-y) in July—the Reserve
Bank of India may have no option but to increase the policy rates again.
This has been going on since March 2010, sufficient time for the government to take remedial action on the supply side. Instead of doing that, it only makes promises that are broken when the next round of inflation numbers are released.