Inflation breaches 5%, FM says no panic

The annual rate of inflation breached the 5-per cent mark for the first time in eight weeks. It stood at 5.01 per cent for the week ended August 26 compared with 4.9 per cent the previous week.

Attributing this to high crude oil prices and the flare-up in wheat and pulses prices, Finance Minister P Chidambaram said he expected inflation to decrease to below 4 per cent in due course.

"We will not hesitate to take monetary and fiscal steps to contain inflation," he said.

"It is technically above 5 per cent, but it is not something to be alarmed about. It is the intention of the government to keep it below that mark. There are pressures due to supply disruption and there is pressure on wheat and pulses," Chidambaram said. Analysts said they expect the inflation rate to head higher in the weeks ahead. The Reserve Bank of India had earlier this week said that inflation pressures remain, as state-controlled local fuel prices have not kept pace with global crude prices. It has forecast inflation to be running at 5-5.5 per cent at the end of the current financial year.

The overall price situation in the country was also discussed today at a meeting of the Committee of Secretaries on prices. The meeting convened by Cabinet Secretary B K Chaturvedi discussed that any future revision of the tariff value of palm oil should be effected after being approved by the committee.

The present situation of wheat, sugar and pulses also features in the talks. It was noted that the pressure on wheat prices is expected to continue on account of a 30 per cent decline in production in Australia, adverse impact of heat in Europe and lower expected crop in Canada.

However, while spot prices are increasing, the futures prices are showing a marginal decline, officials said.

It was decided at the meeting to release more wheat for public distribution system and extend the last date for lifting of foodgrains by the states.

"If the foodgrains are not lifted even by the extended date, the grains would be diverted to states which are more in need of it," an official said.

The CoS noted that there has been no overall decline in the crop acreage of pulses in the country despite floods in some states. Nafed has already executed contracts for 49,300 metric tonne of pulses of which 28,758 metric tonne of urad and 7,550 metric tonne of moong have already been shipped.

The meeting noted that the ban on sugar exports would be reviewed after some time despite the spot and futures price of sugar showing a decline.

Officials said the meeting noted that monsoon was close to normal and that even the previous 30 per cent deficit in Punjab had now reduced to just 3 per cent.