Headline inflation comes down to 8.23% in Jan, but pressure remains

NEW DELHI: Headline inflation eased in January marginally from the previous month but economists said it still remains sticky and is likely to remain above the Reserve Bank of India's (RBI) comfort level until March-end. Data released by the commerce and industry ministry on Monday showed inflation, as measured by the wholesale price index, stood at 8.23%, moderating marginally from December's 8.43%. It stood at 8.53% in the same month last year.

Finance minister Pranab Mukherjee said the problem of inflation continued to be challenging and added that the moderation was too small for him to be comfortable. He said even though overall food inflation was a matter of worry, it had come a long way from the peak. Food inflation rose to 20.21% in December 2009 and peaked in February 2010 at 20.22%. The FM said he expected overall inflation to come down close to 7% by March-end but cautioned that the target was still not good enough and the government would continue its fight against inflation.

Economists said with crude prices rising and upward pressure on food prices globally, inflationary expectations were likely to intensify. They said the RBI would continue its vigil against inflation and would raise interest rates to calm price pressures. The government also revised November's inflation to 8.08% from the previous estimate of 7.48%. "We think it may be around 7.30% by end-March. Next financial year, inflation is likely to decline very gradually," A Prasanna, chief economist at ICICI Primary Dealership, said. Rising prices have remained a headache for the government and RBI. RBI has raised interest rates seven times since March 2010 to tame inflation. Food prices have moderated in recent weeks due to better supplies. The index for primary articles group in Jan rose by 2.4% to 193.4 from 188.9 for the previous month. The index for food articles group rose by 2% to 190.7 from 186.9 for the previous month due to higher prices of fruits and vegetables and jowar (7% each), arhar and coffee (4% each), condiments and spices (3%), moong, barley, masur and mutton (2% each) and bajra, rice, egg, maize, beef & buffalo meat and wheat (1% each). However, the prices of poultry chicken (7%), fish-inland (6%) and tea and milk (1% each) declined.