The Hindu : Business : Inflation eases in Q2: RBI

Online edition of India's National Newspaper
Tuesday, Oct 25, 2005

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Inflation eases in Q2: RBI

Special Correspondent

MUMBAI: The Reserve Bank of India on Monday stated that the inflation eased further in the second quarter, despite continued dominance of supply-side factors. However, "pass through of high international crude oil prices to domestic prices remains incomplete.''

"Fiscal and monetary measures undertaken since mid-2004 to reduce the impact of imported price pressures on domestic inflation and to stabilise inflationary expectations, coupled with the base effects and the revival of monsoon, enabled a moderation in the headline inflation rate during the first half of 2005-06.

"It needs to be recognised that the pass-through of high international crude oil prices to domestic prices remains incomplete,'' the RBI stated in its Mid-term review of macro economic and monetary developments, 2005-06.

The RBI Governor Y. V. Reddy will announce the mid-term policy measures on Tuesday. Inflation and interest rates are the major issues that would be discussed by the Governor.

The Indian economy recorded an impressive performance during the first quarter of 2005-06. According to the Central Statistical Organisation (CSO), real GDP growth in the first quarter (April-June) of 2005-06 accelerated to 8.1 per cent from 7.6 per cent in the corresponding period of the preceding year.

Growth in services sector

Industrial activity was mainly led by the manufacturing sub-sector. The expansion of services sector continued to be spearheaded by the sub-sector `trade, hotels, restaurants, transport, storage and communication,' and supported by `financing, insurance, real estate and business services' and construction.

Real GDP originating from the `agriculture and allied activities,' however, remained subdues reflecting the adverse impact of the uneven monsoon during 2004-05.

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