Inflation, which impacts the poor disproportionately, has come down by 1.3 percentage points to 8 percent during ten months (July-April) of the current fiscal year , the government said on Sunday.
According to the Economic Survey 2005-06, released here at a news conference, the inflation, as measured by Consumer Price Index (CPI), averaged 8 percent during 2005-06 (July-April), against 9.3 percent in the corresponding period of 2004-05.
On current trends, and barring any adverse shocks, it says that the government is expecting that inflation would be within the target of 8.0 percent set by the government for full year.
During the period under review, food inflation was estimated at 7.0 percent as against 12.8 percent in the same period last year. Non-food inflation at 8.8 percent was on higher side compared with 6.9 percent in the same period last year. The core inflation, which excludes food and energy costs from the headline CPI, moved up and estimated at 7.7 percent as against 7.0 percent in the same period last year.
House rent index also played an important role in building inflationary pressure this year. With second largest weight in the CPI (23.4 percent) after food (40.3 percent), the house rent component of the CPI registered a marginal decline to 10.3 percent as against 11.1 percent in the same period last year.
The survey says that in terms of generating inflation, the phenomenal rise in aggregate demand in the economy, on the one hand, was compounded by supply shocks, on the other. Besides, it says that the eight per cent inflation is also due to various internal and external factors.
The adverse external developments, which impacted the price levels for the fiscal year under review included a continuation of the surge in international oil price to an all-time record of nearly US $75 per barrel in April this year, before pulling back somewhat, coupled with an unprecedented rise in world prices of commodities due to demand from fast-growing economies such as China and India.
Besides, decline in the size of sugarcane crop resulting in relatively less production of sugar within the country as well as significant rise in international prices of sugar owing to diversion of large portion of sugarcane into ethanol (a petroleum substitute) by the world's largest producer, Brazil, also impacted price development.