FICCI too expects inflation to dip Dec onwards

RBI’s claims of inflation easing from December onwards has found support from industry body, FICCI which otherwise is critical of the central bank’s tight monetary stance.

In the economy watch report, the chamber attributed its thesis of easing inflation from this year end to the high base effect of December 2010 to April 2011. The inflationary expectations, which make companies raise prices, have registered a sharp decline, which may be mirrored in the Wholesale Price Index as well.

However, due to supply side constraints, food prices will firm up this winter as well.

Year-on-Year increase in prices based on Imported Inflation has been higher than the Domestic Inflation Y-O-Y recently, possibly because of rupee depreciation.

According to FICCI, the recently announced Euro zone deal could act favourably as far as rupee depreciation is concerned. On the downside, crude prices may rally ahead of the oncoming winter and the Greece debt deal, negating the effects of rupee appreciation.