Price rise to continue for six months, says FICCI

[N.Sukumar]

NEW DELHI: As the government gets into fire-fighting mode to tackle
runaway inflation, a Ficci report has said the price rise will
continue for the next six months and the Centre needs to re-look its
anti-inflationary measures.

"Rising oil, commodity and food prices are a global phenomenon and
these cannot be influenced through monetary policy. It is, therefore,
important that the authorities take a re-look at the anti-inflationary
package," the survey said.

From a low of 4.46% in January 2008, the inflation shot up to 11.05%
for the week ended June 7. The government as well as the Reserve Bank
has taken several fiscal, administrative and monetary measures to rein
in the price rise, the results of which would be evident in a few
months.

Finance Minister P Chidambaram said there is no room for panic and
promised more measures both from the government and the RBI to stem
prices. He has promised more measures to stem prices. "We should not
give room for panic. We should take steps to quell inflationary
expectations...that is precisely the course that the government has
adopted in the past and will adopt in future too," he said. About 68%
of the 317 companies surveyed by the chamber said inflation would
continue to remain above the 7% mark till the end of 2008, with 25%
projecting the rate to be in the range of 9-10%.

A majority also felt that the current bout of inflation is largely due
to factors that cannot be influenced by monetary policy measures. It
said industry is under tremendous cost pressure on account of rise in
price of raw materials, oil products, power, wages and the interest
burden.

"All these factors together have put a dent on the margins and
operating performance of companies, forcing many to offset this
pressure through increase in prices," it said.

With inflation showing little signs of cooling down, industry fears
that interest rates would remain high and may even rise further in the
near term. However, a majority felt that interest rates should be
brought down to check the slackening pace of growth in the
manufacturing sector.

A majority of 88% participants felt interest rates would go up in the
near term. While about half of the participants conformed to RBI's
target of a 5.5% inflation, 21% said the target is unrealistic.

N.Sukumar
Research Analyst