Inflation at 6-7% by March. Why is that so?

Posted By: Religare
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Inflation at 6-7% by March. Why is that so?
Finance Minister, Pranab Mukherjee has found out that India's hangover inflation will make a way out for the level of 6-7 per cent, by the end of March 2012, and that means RBI governor would be comforted then.

India's headline inflation has remained over 9 per cent mark for over more than two years and the farmer of banks kept raising rates successively to tackle it, but that could not happen in time.

Now inflation has started easing on back of falling food prices and as experts believe that the decline is seasonal and still has upside risk.

The intuition of analysts has also got the reality, as the past behaviour of government reforms suggest. The much awaited FDI in multi-brand retail could have been a landmark development for India and so for inflation too, but that too was held by government, on back of pressure from allies.

The second idea that defies Mukherjee's sense is that Indian currency is not going to stop somewhere soon in the comfortable zone, which has already hit lifetime low of below 54 per dollar in December. And the fate of high prices depend upon fuel prices, which depend upon rupee's worth a dollar.

In brief, it would be a challenge that may dent Mukherjee's dream.

Dion Global Solutions Ltd

Read more about: inflation, currency
Story first published: Friday, December 23, 2011, 22:30 [IST]
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