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Will the govt achieve its fiscal deficit target?
Mon, 3 Nov Pre-Open

Over the last few years, inflation has been one of the biggest spokes in the wheel of India's growth story. However, the recent inflation numbers provide some respite. As per recent data released, in September, the retail inflation eased to 6.46%, while wholesale inflation dropped to a five-year low of 2.38%.

This moderation in recent periods has been due to various factors though. Both internal and external factors have played a role. While a lot of it has been accredited to the new Government, it would be unfair to ignore the tailwind of low commodity prices. This is especially true for crude oil.

What's encouraging is that better sowing in various parts of the country is likely to keep a lid on vegetable prices going further. This in turn would be another aid in helping keep inflation under check.Already, number crunching has started and experts seem to be of the view that if these trends persist, the Government could actually be in a position to meet its fiscal deficit target.However, one shouldn't be in any hurry to uncork the champagne just yet. Please note that the reasons the inflation is coming down has got very little to do with our own efforts so far. It is really the high base and the softening of commodity prices that has come to our aid.

It does not need reminding inflation problems in India are mostly supply side and not based on demand. Consequently, the structural bottlenecks are where the problem lies.

And unless these are tackled on a war footing, we will continue to be at the mercy external factors and rain gods for our inflation levels.

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