Monthly Economic Review: Finance Ministry warns of elevated inflationary pressures in coming months

The Finance Ministry has warned that the inflationary pressures would stay elevated for the next few months. The ministry has advised both the government and the RBI to be more vigilant. The ministry in its monthly economic review has attributed this prediction to the persistent global uncertainty and domestic disruptions.

However, the ministry has also noted that the price pressure in food items is expected to be transitory which is evident through the agriculture sector's stead performance. The report also mentioned that Centre's pre-emptive measures to curb food inflation along with the arrival of fresh stock is likely to negate the price pressure in the market soon.

Also Read: July retail inflation at 7.44%; rises to 15 month high as vegetable prices surge

Meanwhile, the monthly economic review has also said that the local consumption and investment demand would drive growth.

This comes, after data showed that a surge in vegetable prices drove India's headline retail inflation to a 15-month high of 7.44% in July from 4.87% a month back. The unexpectedly high Consumer Price Index pushed the government to bring the food inflation under control. The centre has now announced a 40% export duty on onion on August 19 to discourage exports and ensure sufficient domestic supply. The government has also started selling tomatoes at discounted prices in Key consumption areas.

On the basis of these measures the prices could be expected to come down, however some economists believe that CPI inflation for the month of August is likely to stay above 7%. The festival season would also bring a decline in inflation and economists are expecting the inflation to go below 5% by October.