The major concern for RBI as well as the Government is the Inflation. The average headline inflation in April-December 2010- 11 at 9.4 per cent was the highest ever in the decadal average. This is also true of annual average inflation based on the WPI, for primary food articles, fuel and power, and manufacturing products. The survey says that even as the rate itself remains uncomfortably high, the reversal in the direction of inflation in December is also striking. After some moderation between August and November 2010, inflation rose again in December 2010 on account of sharp increase in the prices of primary food articles and the recent spurt in global oil prices.
Going forward, the inflation outlook will be shaped by the food price situation and the demand side pressures in the economy. Rise in food inflation has not only persisted for quite some time, but has also been rather sharp. High inflation in food articles is not unique to India, it has spiked in many other countries as well. The domestic food price situation could be exacerbated by the increase in global food prices because of dependency on import of some food items like edible oils. Current growth and inflation trends warrant persistence with an ant inflationary monetary stance.
List of Topics : Economic Survey 2010-11