The government today said the current inflationary pressure is a matter of "grave concern" and termed the rising fuel prices and vagaries of Indian monsoon as challenges.
"...Of course monsoon is perennially a challenging kind of thing but the fuel prices is a big challenge. We hope that will come down in due course of time... And as far as food structural factors (are concerned) inflation going up is an area which is a grave concern," Department of Economic Affairs Secretary R Gopalan said at a CII conference here.
His comments come a time when the government has declared inflation control as one of its major focus area. Headline inflation in the country has been above 8% since February 2010.
Inflation was 8.31 % in February this year, the latest data currently available. Food inflation has also been in the double-digits for most of last year.
The Reserve Bank has already revised its inflation projection for March-end, 2011, to 8 % from the earlier 7 %.
The apex bank has hiked its key-policy rates eight times since March 2010 to tighthen liquidity supply as a means to curb inflation.
Multi-lateral agency ADB had earlier this month projected inflation to be around 7.8 % in 2011-12, much above the Government's comfort zone of around 5 %.
Gopalan said inflation is still not in acceptable levels though it is going down.
Global banking giant StanChart has also projected India's average rate of price rise at 7.9 % this fiscal.
While food items, which make up around 15% of the overall Wholesale Price Index (WPI) basket, were the major contributors of the inflationary pressure for some time, rising
crude prices have now put renewed anxieties.
At a time when the foodgrain production, specially of wheat and pulses, is expected to touch record numbers in the 2010-11 crop year (July-June), political unrest in Middle East and North Africa has driven global crude prices to over $100 per barrel.
However, agriculture in India being predominately rain-fed, Gopalan's words seems to point towards the challenge due to any disruption in the monsoon.
The DEA Secretary also said that work has started on guidelines for an infrastructure debt fund to help the core sector meet its financing requirement which has been pegged at $1 trillion during the 12th Plan period (2012-17).
"This is an area where Planning Commission initially started the work. We want to create the fund which are generic in nature and which in some sense will need to be one fund, can be two or three funds. It can also be more than that since our requirement for funding will be $one trillion in 12th Plan," Gopalan said.
