An internal assessment by top government officials, shared with Prime Minister Manmohan Singh on Friday, projects inflation as measured by the wholesale price index to slide to a comfortable below 5% by March 2009?just in time for the 2009 Lok Sabha elections.
These projections were discussed at a meeting convened by the Prime Minister on Friday, the third such meeting in two weeks, attended by finance minister P Chidambaram, Planning Commission deputy chairman Montek Singh Ahluwalia and agriculture minister Sharad Pawar.
The projections, which factor in rising oil prices, projected food production as well as the monetary and fiscal measures taken in recent months, indicate that in a best-case scenario, inflation could actually cool off to as low as 3.5% by next March.
The projections come at a time when the government is facing serious flak from allies and opposition parties over rising prices. Headline inflation for the week ended May 10, 2008, was 7.82%, according to data released on Friday.
More worryingly, however, the final figures for inflation in the week ended March 15 were revised upward from 6.68% to 8.02%?the highest level under the UPA since August 2004. The difference between the two rates, which has so far averaged around 30 basis points, went up by over 80 basis points in February and March.
?All government departments are keeping a close watch on the inflation figure so that it does not go beyond the 8% mark. It is expected to peak by September-October,? a senior government official told FE.
In case the monsoon does not arrive in time and foodgrain production takes a further hit, officials fear that inflation could touch 8.3% by around September.