Inflation may rise in October due to suppressed power, fuel prices

KOLKATA: Inflation in India may inch up due to suppressed power and fuel prices and impact of hailstorm on potato prices, Reserve Bank of India’s technical advisory committee on monetary policy felt before the central bank announced its monetary polcy review on April 1. The panel members expect rise in general prices after October this year anticipating an economic turnaround leading a higher demand for goods.

"There are clear upside risks, such as suppressed pricing in electricity, LPG and diesel; impact of hailstorms on potato prices, if not on onion," RBI said in the minute of the meeting published Friday.

There is increase in rural employment guarantee by 50 days and decline in female labour force participation. Inflation excluding food and fuel is sticky since inflation in housing, education and medical care is still elevated. The shift in land utilisation by as much as 10 per cent of total cultivable area away from traditional agriculture and in favour of vegetables should help soften the inflation momentum, but for short-run blips, like hailstorms/unseasonal rains.

These were the key take ways from the 36th technical advisory panel meeting in the run up to the monetary policy review on April 1, 2014. A majority of members was expecting a US-led economic growth even as emerging economies continue to be sluggish while they took a unanimous view that India’s real GDP growth would be muted.

The panel members said that the Federal Reserve may raise interest rates earlier than is being anticipated as there could be pressure on wage leading to higher inflation. Most of the Members were of the view that global growth is likely to be better than anticipated, led by advanced economies, especially the US, while some felt that global recovery may be weaker than expected. The panel members had expressed concern on local inflation being persistently higher than in other countries.