A day before the announcement of the inflation data for August, the government said inflation is likely to come down in the subsequent months on good monsoon. The government is slated to announce the inflation data for August on Tuesday.
Chief economic advisor to the government Kaushik Basu also said food inflation is likely to come down as sowing this year has been better than last year. ?I am expecting the weekly food inflation to be slightly down from what it was earlier,? he said.
Basu’s statement comes at a time when the country has seen food inflation on the rise for the second consecutive week.
“The WPI data for August will be high as usual due to base effect. The effect of the monsoon was felt in the last week of August,” Planning Commission deputy chairman Montek Singh Ahluwalia told reporters in New Delhi. He added the figures will reach the 6% level by December-end.
The index of food articles based on wholesale prices increased 0.9% to 306.1 during the week ended August 28 from the previous week. The y-o-y inflation rate increased to 11.47% from 10.86% a week earlier.
?Food inflation by November-end was 21% and it is still high at 10-11%, but way below what it was eight-nine months ago,? Basu said, adding rainfall in the country is “exactly at average” with a shortfall in northeast and eastern part of the country. ?If this suffering continues then there is a worry on the northeastern front. Average sowing this year across the crops is better than last year’s. So the all India food situation should be good but there will be regional variations in food production.? He warned that the international situation of wheat seemed to be “extremely worrying” as the Russian crop had failed and UK and Kazakhstan were not doing well either.
On the overall inflationary trends too, Basu is hopeful of it going southwards. ?But in the long run inflation will have a downward trajectory. It was very high from June to November last year,? he added.
The inflation based on movement in wholesale prices was 9.97% in July. It had been in double digits for five months till June. Ahluwalia also said overall inflation is likely to dip from September and fall to around 6% by December. “You will see the downward trend in WPI inflation in the September data which will come out in the middle of October. And I know that by December it will be close to 6%,” he said.
Ahluwalia also said there is no need to revise the GDP growth target of 8.5% for this fiscal, despite the surprisingly good growth in industrial production during July.