FM says pointed attack on inflation to continue

The Centre had in May cut fuel taxes and sought to ease supply-side bottlenecks by raising export duties on steel and iron ore to control inflation.

Finance minister Nirmala Sitharaman on Tuesday asserted that the “pointed attack” on inflation will need to continue, and that she has been monitoring price pressure “item by item”, as elevated inflation ultimately crimps growth.

“As the RBI has estimated, till the start of the second half of the year, both the central bank and the government will have to be mindful. We will have to be mindful and watchful of how the price movement is. I will keep monitoring item by item to rein in prices for anything that goes haywire. This pointed attack on inflation will need to continue,” Sitharaman told a group of reporters here.

The minister’s statement comes on a day when official data showed retail inflation eased for a second straight month to 7.01% in June, having dropped from a 95-month high of 7.79% in April, although the pace of deceleration was marginal from the May level (by just 3 basis points).

The Centre had in May cut fuel taxes and sought to ease supply-side bottlenecks by raising export duties on steel and iron ore to control inflation. The RBI, too, has raised the benchmark lending rate by 90 basis points since May. Analysts said more measures, especially the supply-sides ones, may be in the offing.

“I see monsoon being favourable to agriculture. (Farm) Production will be good and rural demand will remain intact,” Sitharaman said, remaining cautiously optimistic about inflation.

On Saturday, RBI governor Shaktikanta Das exuded confidence that inflation would start easing gradually from the second half of this fiscal, “precluding the chances of a hard landing” or recession.

At this point of time, the supply outlook appears favourable and several high-frequency indicators point to resilience of the recovery in the June quarter, the governor had said. His statement may lead to expectations of revisions in inflation projections in coming policy updates.

The central bank last month raised its inflation projection for FY23 to 6.7% from 5.7% earlier. It had said inflation could stay above 6% in the first three quarters of this fiscal—7.5% in Q1, 7.4% in Q2 and 6.2% in Q3 and 5.8% in Q4. At 7.3%, however, the retail inflation for the June quarter undershot the central bank’s forecast for Q1.