Inflation to fall to 6-7% by March end: Pranab

Encouraged by a sharp dip in December inflation, Finance Minister Pranab Mukherjee today said the declining rate of price rise indicates improvement in macro-economic parameters and projected March-end numbers at 6-7%.

Headline inflation, as measured by Wholesale Price Index (WPI), fell to a two-year low of 7.47% in December 2011, from 9.11% in the previous month.

"Headline inflation should be between 6 and 7% in March end 2012," Mukherjee said, adding that he is confident that moderation in inflation would continue in the coming months.

As per the official data, prices of food items rose at a lower rate of 0.74% in December, compared to 8.54% expansion in the previous month.

The decline in the December inflation, he said, is "mainly due to significant decline in inflation for primary articles, including food inflation."

Mukherjee said good industrial production numbers for November at 5.9% and a sharp decline in inflation "indicates some improvement in the overall macro-economic parameters in the second half of FY12."

"This trend is likely to consolidate in the coming months with some policy correctives," Mukherjee added.

Prices of manufactured products, which account for 65% in the WPI basket, went up by 7.41% year-on-year in December, as against 7.70% in the previous month.

"The manufactured inflation and inflation in the power group of items ... Continued to be a cause of concern," Mukherjee said.

He added that the softening in prices of manufactured goods would be gradual, even as non-food primary inflation is witnessing rapid decline.

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