The inflation rate, which had shown moderation in the last two months, has once again shown signs of revival which is a cause for concern to industry which had hitherto been hopeful of declining trend to continue. If such a trend continues, then it is highly unlikely that the current rate of inflation would touch 7 per cent by the close of the financial year as indicated by the Government. At a time when industry is already reeling under the impact of an investment led slowdown caused by tightening monetary policy of the RBI and with manufacturing sector growing at a modest 4.4 per cent during April- January 2011-12, the upturn in inflation spells bad news for industry, according to CII.
CII notes that the latest uptick in inflation is essentially a result of the revival of inflation in primary articles, especially food prices, which had shown a secular decline over the previous two months. In fact, food prices have gone up significantly, from 0.79 % in December 2011 and (-) 0.52% in January 2012 to a whopping 6.07 per cent in February 2012. This calls for adequate supply side responses to address the structural bottlenecks facing agriculture production and distribution, according to Mr. Chandrajit Banerjee, Director General, CII .
In such a scenario, CII recommends that the government should take Budget as an opportunity to address the unfinished reforms agenda of agrarian reforms .
14 March 2012