Base effect to have an impact on inflation, says Ficci

NEW DELHI: Inflation is likely to decline till September mainly due to impact of base effect, a Ficci report today said.

The base effect pertains to high inflation numbers a year ago, which makes even a high increase in the price index now appear much lesser.

In its economy watch, Ficci said: "...the base effect will continue to have an enabling impact on inflation numbers till September 2012".

It said that commodity prices (except oil) will remain subdued, resulting in lower input costs for the manufactured products.

"Moreover, the rupee is expected not to depreciate significantly from the current levels, thus helping in containing imported inflation," it said.

Inflation stood at 6.95 per cent in February. The report further said that there is now an urgent need to kick start the process of revival in the manufacturing sector and "this can be only done through an investment revival".

The RBI outlook released recently is clearly forthcoming about a moderate revival of investment in FY'2013 on the back of increased public investment crowding in private investment, it said.

It said that an increase in private corporate investment would require a strong incentivized climate.

On insurance sector, it said that even as the industry is slowly aligning itself with the new structure, the lapsation of life insurance policies remains a cause for concern worldwide for the industry.

"In particular, persistency of procured business has emerged as the key challenge to be met for the insurance companies in India," it added.