Difficult to bring down inflation to ideal level of 4-5 pc

New Delhi, Oct 26 (PTI) Amid expectations that RBI may
raise short-term rates to contain inflation, the government
Tuesday admitted that it is difficult to bring down the rate
of price rise to an ideal level of 4-5 per cent, while the
central bank said it is a challenge to keep it under check.
"I will try to bring it (inflation) down through whatever
mechanism we have...it would be ideal if we have 4-5 per cent,
but may be difficult. But I do feel that annualised inflation
rate would be around six per cent," Finance Minister Pranab
Mukherjee said in Economic Editors'Conference.
Mukherjee identified rising prices as a major concern,
although inflation has declined to 8.6 per cent from double
digits in June.
Inflation, which has emerged as a big political issue,
was 8.6 per cent in September. However, food inflation was
15.53 per cent for the week ending October 9.
Attributing inflation mainly to rising food prices,
Mukherjee said in terms of consumer price indices (retail
prices), inflation in the three major groups -- industrial
workers, agricultural labour and rural labour -- have come
down to single digit level for the first time in 16 months.
Earlier, there has been wide differences between
wholesale price inflation and consumer price indices, because
food prices were rising at faster pace, which has higher
weight in retail numbers.
Meanwhile in Mumbai, RBI Deputy Governor Subir Gokarn
said,"Persistent price increases in commodities for which
there are less effective substitutes, with other things
remaining equal, will raise the potential rate of inflation
over a period of time. India's challenge is to keep inflation
under check."
Food prices were expected to cool following a normal
monsoon and improved supplies, but the continued upward spiral
in prices has belied that optimism.
The RBI is widely expected to continue with policy-
tightening measures at its review meeting on November 2, with
a 0.25 per cent hike in key short-term rates on the cards.
"As regards food, the pressures in the Indian economy are
predominantly domestic. Our Green Revolution in the 1960s
raised the production of cereals dramatically, which increased
availability and stabilised prices," Gokarn said.
"However, what we are seeing Tuesday is the impact of
increasing affluence on the demand for a variety of food items
that go far beyond cereals. As people become more affluent,
their diets diversify," he added.
Blaming high food inflation on the changing food habits,
he said there has been an enormous increase in the demand for
various food items beyond cereals. The demand for high protein
foods like pulses, milk, meat, fish and eggs has surged and so
has the appetite for sugar, fruits and vegetables.