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NCAER sees inflation rising to 5.11% for FY08

NCAER sees inflation rising to 5.11% for FY08
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First Published: Tue, Aug 14 2007. 02 46 PM IST
Updated: Tue, Aug 14 2007. 02 46 PM IST
PTI
New Delhi: Hardening crude oil and metal prices may push up inflation to 5.11% for the current fiscal — higher than the Reserve Bank’s estimate, economic think-tank NCAER has projected.
According to the NCAER quarterly review for 2007-08, the high inflationary expectation stems from surging prices of crude oil and hardening metal prices and high economic growth which it forecast at 8.53% for the current fiscal.
“The role of the high economic growth (9.4% in the last fiscal) exerting pressure on prices also needs to be kept in mind,” the report said, adding the overall setting for the fiscal is one of high growth and high rate of inflation.
Inflation, which has remained below 4.5% for the last six weeks, stood at 4.45% for the week ended 28 July, against 4.36% for the previous week, on the back of expensive food items like fruits, vegetables and some manufactured products.
The report said global oil prices have hardened of late and if the trend holds, the government may be forced to contemplate an upward revision in retail prices to reduce losses suffered by the oil companies.
The crude oil price hit $78.36 a barrel on 4 July, nearing its lifetime high, fuelling inflationary expectations.
With an increasing demand of oil due to growth in world economies, particularly India and China, the possibility of oil prices being pushed up by the demand-supply gap remains a possibility, NCAER said.
Besides, international trend are responsible for the surge in prices of leather products, basic metals and alloys, beverages, tobacco and tobacco products and non-metallic mineral products, it added.
However, the NCAER report said prediction of normal monsoon has given rise to expectations of a fall in food prices in the coming months.
The report while reviewing the inflationary trend said, at the outset, it seems that the monetary and fiscal measures adopted by RBI and the government like revision of prime lending rate have paid off.
But other factors like the appreciating Indian rupee, high WPI base last year and easing of the supply situation for certain primary and manufactured articles have also contributed to the fall in inflation.
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First Published: Tue, Aug 14 2007. 02 46 PM IST