The finance ministry on Tuesday said that it will closely monitor 18 commodities, including high-speed diesel and onion that could lead to a spike in wholesale index-based inflation levels. It has also projected headline inflation in the range of 6.5 per cent to 7.2 per cent at the end of the fiscal in its Quarterly Review (April to June 2013-14).
The 18 commodities have a high weightage of 17.08 per cent in the WPI basket. Apart from high-speed diesel, the commodities include food items like rice, onion, fish, brinjal, wheat, tapioca, tea leaf (unblended), wheat flour, poultry chicken and sugar. Non-food items like raw cotton, fodder, crude petroleum, electricity will also be monitored closely in the coming months, it said.
The finance ministrys comments come after headline inflation rose to a six month high of 6.1 per cent in August this year, driven by a 244.6 per cent rise in inflation in onions.
The report also noted that the depreciation in the rupee has had an impact on crude oil prices, which had a cascading impact on food prices as well.
High-speed diesel oil contributed more than 20 per cent to headline inflation in first quarter, which is five times higher than its weight (4.67 per cent) in WPI, the ministry said, adding that a periodic hike in its prices has helped reduce the subsidy burden and fiscal deficit but has released a part of suppressed inflation.
The first quarter review of the economy also stressed that the fiscal deficit will be maintained at the targetted 4.8 per cent of the GDP in 2013-14. The ministry, however, admitted that the first quarter performance on the fiscal front has not been too optimistic.
But overshooting of government expenditure and under-performance of revenue receipts in the first quarter is a reflection of the current macroeconomic environment and as per the trends in the first quarter for most of the previous years, the ministry stressed in its review.
The Centres fiscal deficit touched 74.6 per cent of the full year target between April and August this year raising concerns that the annual target will be breached on the back of higher food and fuel subsidies as well as lower tax revenues.
To meet targets
* Finance ministry says that fiscal deficit will be maintained at 4.8% in 2013-14
* Projects WPI inflation in the range of 6.5% to 7.2%
* Lists 10 policy priorities, including containing twin deficits, augmenting forex reserves
* To closely monitor 18 commodities, including high-speed diesel and onion that could lead to a spike in WPI.