Inflation to soften by end 2008: adviser
Friday, 20 June 2008

The outlook for inflation in India is uncertain in the June and September quarters, but there should be a clear downtrend in the December quarter, the chief economic adviser of the finance ministry said on Thursday, reports Reuters..

"There is a lot of uncertainty over the inflation rate in India over the next few months," Arvind Virmani said in a speech on the economic outlook in Mumbai.

Data on Friday is expected to show annual inflation jumped to 13-year high of 9.82 percent in early June, spurred by a rise in state-set fuel prices, a Reuters poll found, with some economists expecting a rate above 10 percent.

India raised pump prices of petrol and diesel by about 10 percent earlier this month, joining other Asian countries no longer able to afford big subsidies in the face of soaring world oil prices.

High global food prices have also added to the inflation problem.

"All commodities besides oil by and large peaked some months ago. Hopefully, in the next quarter it will get clearer," Virmani said, adding there were signs of a downtrend in food prices,

The central bank raised its key lending rate by 25 basis points to 8 percent last week, the first rate rise in more than a year, to contain inflation expectations.

That and expectations of further tightenings has raised concerns growth may slow down significantly, after the economy expanded at 9 percent or more in the past three fiscal years.

But Virmani said growth was likely to average 9 percent in the 11th five year plan, which covers 2007 to 2012.

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