Government will be taking steps to ease supply side constraints for lowering the headline inflation rate which has reached 5.45 percent, the highest in 18 months.
Finance Minister P Chidambaram said inflation is obvious as Indian economy is expanding rapidly. He refused to admit that the economy was tending towards inflation currently.
Inflation would possibly fall in next few weeks because of recently lowered auto fuel rates, said Rakesh Mohan, Deputy Governor, RBI.
Upswing in inflation based on wholesale price index (WPI) for the week ended on November 18, 2006 could force interest rates to shoot up. Ten year Government paper is trading at 7.43 percent which is 17 basis points less than last month.
Since September 30, 2006 inflation has been over 5 percent. It was 5.29 percent last week and 4.27 percent in same period last year. Weekly price index remained 4.5 percent in 2005.
Rates of raw silk and raw rubber have declined. Production has become more expensive due to prices of rubber, chemicals and basic metals going up. Group index of fuel, power, light and lubricants is constant since last week.
WPI figures indicate an elevation of 1.7 percent in prices of minerals due to rise in rates of iron ore.
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