IEG sees inflation inching up to 5%

The Institute of Economic Growth (IEG) has predicted a higher inflation rate of 4 to 5 per cent in the coming months. Dr B. B. Bhattacharya...

The Institute of Economic Growth (IEG) has predicted a higher inflation rate of 4 to 5 per cent in the coming months. Dr B. B. Bhattacharya, head of the Development Planning Cell of IEG said, “inflation rate has started hardening and delayed monsoon may add to inflationary expectations.”

The IEG expects the rate of inflation to go up to 2.97 per cent in July, 3.61 per cent in August and 4.53 per cent in September. National Council of Applied Economic Research (NCAER) also expects the rate of inflation to be around 4.5 per cent. According to NCAER economist Dr Shashanka Bhide, “increase in procurement prices, higher energy charges and depreciation of rupee are adding to inflation.”

The IEG report points out that the rate of inflation, based on Wholesale Price Index (WPI) has increased to 2.05 per cent (week ending June 15, 2002) from 1.6 per cent in May 2002. Increase in prices of primary articles, fuel prices and the money supply, Dr Bhattacharya said, has put upward pressure on prices.

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According to IEG, “expected increase in the money supply growth followed by decrease in the Cash Reserve Ratio, no recovery signs in real economy, volatile world oil prices and increase in truck lease rates may lead to further increase in prices in the coming months.”

Interestingly, Dr Bhattacharya said, the Consumer Price Index (industrial workers) (CPI-IW) linked inflation rate will slide in the coming months. According to IEG projections, the CPI-IW inflation rate will slide to 4.47 per cent, 4.29 per cent and 4.11 per cent in the next three months. The CPI-IW inflation rate in May 2002 was 4.66 per cent.

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