Prices may go up further in July, but will cool by Dec: Montek

The plan panel today said fuel price hike will further increase inflation in July, but it will fall below double digits by the end of December.

"I think although there will be an adjustment upward (in inflation) when fuel price hike gets fed in July numbers... I don't alter my conclusion that at the end of the year it will be low," Planning Commission Deputy Chairman Montek Singh Ahluwalia told reporters on the sidelines of an Indo-Oman event.

He said that inflation will be well below double-digit by the end of this year. For June, wholesale price-based inflation inched higher to 10.55 per cent against 10.16 per cent in May.

He said the number seems to be consistent with the sort of cautious optimism we have been expressing. "You will see more decline as time goes by," he said.

Ahluwalia said high inflation cannot be avoided by not adjusting fuel prices. "This will result in huge losses to oil marketing companies. You will cover these losses by hidden subsidies that would generate inflationary pressure," he said.

However, in 2009-10 the government had borne a loss of over Rs one lakh crore due to subsidies on diesel, LPG, Kerosene and petrol. 

On June 25, the government had hiked petrol prices by Rs 3.5 a litre while deregulating its pricing, and diesel by Rs 2 a litre. Besides, it raised prices of LPG (cooking gas) by Rs 35 a cylinder and kerosene by Rs 3 a litre.