'Inflation to remain above 7pc mark till year-end'

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New Delhi, Jun 22: A FICCI survey showed that inflation will remain above seven per cent mark till end of this year and attributed the current bout of soaring inflation to external factors that cannot be really influenced by monetary policy measures.

Against the background of inflation soaring to a 13-year high of 11.05 per cent for the week ended June 7, the industry body had conducted survey on inflationary expectations amongst Indian industry. ''Rising oil prices, commodity prices and food prices are a global phenomenon and these cannot be influenced through the monetary policy,'' FICCI said. It is, therefore, important that the authorities take a relook at the anti-inflationary package, it added.

Industry is under tremendous cost pressure on account of rise in the prices of raw materials, oil and oil products, power, wages and salaries and interest burden.

''All these factors together have put a huge dent on the margins and on the operating performance of the companies forcing many of them to partially offset this pressure through an increase in prices,'' FICCI said.

Given the present situation on the inflation front, industry fears that interest rates would remain high and possibly rise even further in the near term.

In the context of slackening pace of manufacturing sector growth, majority of the industry members felt that interest rates should be brought down.

FICCI survey showed that there is a strong feeling amongst members of Indian industry that inflationary pressures would be maintained and possibly rise further in the near term.

Nearly 68 per cent of the respondents felt that the current inflation rate would be either maintained or it would further increase over the next six months.

While 38 per cent of the respondents felt that inflation will continue be in the range of seven to eight per cent in six months from now, another 19 per cent felt that inflation rate would be in the range of eight to nine per cent.

About six per cent of the survey participants felt that inflation would be in the range of nine to ten per cent in six months from now.

Industry response on RBI's inflation target of 5.5 per cent showed that there is a clear preference amongst industry representatives for inflation to be around 5.5 per cent with a downward bias.

While nearly 50 per cent of the participants felt that RBI's target of 5.5 per cent for inflation is just about right, another 21 per cent of the respondents felt that this target is too high.

Responses on the outlook for interest rates show that an overwhelming majority of 88 per cent of the survey participants felt that interest rates would either remain the same or would further go up in the near term.

Amongst this set of respondents there is an almost equal distribution, with 44 per cent saying that interest rates would remain at current levels over the next six months and the other 44 per cent saying that interest rates would rise further in the coming six months.

''These results can be interpreted as an acknowledgement of RBI's tight monetary stance and of a likely further tightening of the monetary policy in the near term given the present inflationary situation,'' FICCI said.

On what would be the best course of action on the interest rate front given the present state of the economy, the responses received show that close to 50 per cent of the participants felt that interest rates should go down.

While another 37 per cent felt that interest rates should stay at the present level, about 14 per cent of the survey participants felt that interest rates should go up.

UNI

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