Price pressures warrant greater vigil: Finance ministry

livemint.com:

RBI is warranted on inflationary pressures which may remain elevated in coming months due to global uncertainty and domestic disruptions, finance ministry said in its latest monthly economic review. The warning about price pressures comes in the context of consumer price index (CPI) based inflation hitting 7.4% in July, way above the RBI's tolerance range, posing a headache to policy makers. Prime Minister Narendra Modi led NDA government, which will seek a return to power at next year's national polls, has already imposed export restrictions on rice and wheat and resorted to administrative steps and import of onion to cool local prices.

Though monsoon rain in August has been deficient, the pre-emptive steps taken to check food inflation and the arrival of fresh stock, will help to address price pressure in the market, the review said. Earlier this month, the RBI chose to retain the repo rate at 6.5% while remaining focused on withdrawal of accommodation to ensure that inflation progressively aligns with the target of 4%. The central bank's estimate is that the economy will grow at 6.5% this fiscal.

Separately, State Bank of India (SBI) said in a research report on Tuesday that growth could be a notch up at 6.7%. SBI pointed out there has been a surge in capital expenditure in the June quarter, with Central government spending more than a quarter of the budgeted target, while states spending at 12.7% of their budgeted level. "States like Andhra Pradesh, Telangana and Madhya Pradesh where are elections are due, have registered capital expenditure growth up to 41%," SBI said.