Tuesday, December 25, 2007

Will inflation rise in 2008?

 Inflationary pressure measured by the wholesale price index (WPI) has been easing steadily since April 2007. It has come down from 6.3% in April to 3% in November. This is certainly a good omen. But 2008 could face new pressures, stemming from global and domestic forces.

In the recent past, primary articles have fuelled inflationary pressures significantly. Food articles alone have contributed as much as 17%. This is particularly relevant in the context of global agricultural prices. The Economist’s food price index is now at its highest since its introduction in 1845.

In 2008, with Lok Sabha elections around the corner, the Union government can take no chances with politically sensitive food prices. This year itself, the government allowed private import of wheat at 0% duty, reduced the customs duty on pulses to zero, reduced duty on edible oils and banned exports of pulses, wheat and non-basmati rice. We can certainly expect more of the same next year.
Says:Amit Mitra

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