Check money supply to contain inflation: IMF

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Washington, Jul 6: inflation in India is not a unique phenomenon, as it has risen everywhere in the world. “In India, as elsewhere, it is being driven by food and fuel, even though only a few components of fuel prices (naphta, aviation fuel, etc) had been adjusted previously. Now that prices of other components are also being adjusted, you will see the effect in the WPI a bit more,” Kochhar said.

While prices of certain of petroleum products like petrol, diesel, LPG, kerosene are fixed by the Government, prices of certain others like Naphtha, aviation turbine fuel, light diesel oil are market driven.

The IMF official said, “But inflation in India is not concentrated only in food and fuels. For example, manufactured goods’ inflation excluding metals has also gone up. “Even if the so-called volatile items of prices like food and fuel are taken out, you still have core Inflation, the non-volatile parts of inflation, running at pretty high levels in India, she said.

“So, part of the run up in inflation is a global phenomenon. However, in India, inflation is a combination of the supply shocks as well as Indias still strong underlying demand momentum,” the senior IMF official said.