India will continue to face inflationary pressures due to high global commodity and oil prices compounded by production shortages, Union Finance Minister Pranab Mukherjee said on Saturday.
?We are told that there could be pressure on commodity prices because of shortage in production of certain essential food items,? Mukherjee was quoted as saying on the sidelines of an Indian Banks Association annual meeting in Mumbai.
The minister said that the uncertainty in global markets, particularly on products that India has to import hinted towards an increase in inflationary pressures on prices internally.
?Inflationary pressures have no predictability or a certain direction. Like in 2008, when oil and commodity prices shot up and then declined drastically, commodity prices remain unpredictable today. It is too unpredictable, nobody can comment on how these will behave,? he added.
However, the government along of the Reserve Bank of India (RBI) were keeping a vigilant eye on the rising prices besides trying to achieve higher growth rates and appropriate measures would be taken, Mukherjee said.
?By constantly adjusting the policy, both from the supply side and the demand side, and by taking appropriate fiscal policies in tandem with the RBI, we are trying to achieve high growth and acceptable levels of inflation,” he said.
India?s headline inflation dipped slightly from 8.98 percent in March to 8.66 percent in April, while food price index came down to an 18-month low of 7.47 percent for the week ended May 7 against 7.70 percent in the preceding week.
The RBI has raised its lending rate by 250 basis points since March 2010 as it continued to tightly regulate the inflationary pressures. Earlier this month, on May 3 the federal bank hiked repo rates by 0.50 percentage points (50 basis points) to 7.25 percent.
Commenting on the hike, RBI Governor D Subbarao had said, “Global commodity prices have surged in recent months and are likely to remain firm suggesting higher inflation will persist and may even get worse.
?The headline and core inflation have shot past the most pessimistic forecasts in the past few months,? he said.