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Need to address supply side constraints to restrain CPI inflation: Finance Minister

16 Aug 2013 Evaluate

Amid concerns over rising prices of vegetables and other essential commodities, Finance Minister P Chidambaram said that unless supply side constraints are addressed, consumer price inflation is not likely to fall. Indian annual inflation rate based on general Consumer Price Indices (CPI) combined stood at 9.64% in July on YoY basis. Among all the constituents that make the CPI, vegetables recorded the highest inflation of 16.40% in July.

By adding further, Chidambaram said that although the wholesale price-based inflation has come down to below five percent in five months till June, efforts would have to be made to address the supply side problems to bring down the retail inflation. However, India's wholesale Price Index (WPI) inflation shot higher to 5.79% for the month of July as against 4.86% for the previous month of June. The July inflation also came above the Reserve Bank of India’s (RBI) perceived comfort level of 5%.

At present, the central bank is concerned over the widening gap between the wholesale price index (WPI) inflation and consumer price index (CPI). Over the past few months, the CPI (rural and urban) inflation remained close to double digits, compared with WPI inflation, which fell below five per cent. The RBI had pointed out that the difference between wholesale and retail price levels can largely be attributed to trade and transport margins and taxes across states.

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