Inflation to remain at 9 per cent till October: PMEAC

NEW DELHI: The Prime Minister's Economic Advisory Council today projected inflation to remain high at around 9 per cent till October and said Reserve Bank may have to continue with its tight monetary policy till price situation stabilises.

The rate of price rise will ease from November, declining to around 6.5 per cent by March 2012, PMEAC Chairman C Rangarajan said while releasing the Economic Outlook for 2011-12.

"The Council expects that the headline inflation would continue to be at 9 per cent or higher in the months of July- October. There will be some relief starting from November... we expect inflation to be at 6.5 per cent in March 2012," Rangarajan said.

Expressing concern over inflation, which was 9.44 per cent in June, the report said while pressure from food inflation has fallen in recent months, the rate of price rice still remained quite high with the possibility of further surge in the coming months.

As regards the global commodity prices, the Economic Outlook warned that "the situation for food, energy and other commodities has been bad and is getting worse".

As far as the domestic situation is concerned, the PMEAC said that though non-food manufactured inflation has come down from 8.5 per cent in March to 7-7.3 per cent in the first three months of this fiscal, the fall has been offset by an increase in prices of manufactured food items like edible oil, processed tea, coffee and sugar.

The manufacturing items have a share of over 65 per cent in the Wholesale Price Index (WPI) basket.

It further said that the hike in prices of diesel, cooking gas and kerosene announced in late-May will continue to impact the inflation numbers.

"The rationalisation process in the pricing of automotive fuels and other subsidised petroleum products is still to be completed and this will have an impact on price levels in the coming months," it said.

As inflationary pressure continues to sustain, the PMEAC said the RBI may have to continue with its current policy of monetary tightening.

"It is certain that the RBI will have to continue to maintain a tight monetary policy stance for quite some time, given the combination of domestic inflationary situation and the international backdrop," Rangarajan said, quoting the report.

The apex bank has hiked its policy rates 11 times since March 2010 to tame demand and curb inflation. Headline inflation has been above the 9 per cent mark since December last year.