Press Information Bureau

Government of India

Ministry of Finance

13-December-2012 18:47 IST

Overall inflation measured in terms of Wholesale Price Index (WBI) averaged 9.56% in 2010-11, 8.94% in 2011-12 and was placed at 7.45% in October, 2012.

Government monitors the price situation regularly and price stability remains high on its agenda. Necessary fiscal, monetary and administrative measures have been taken to contain inflation.

Both WPI and the Consumer Price Indices (CPIs) have only a partial coverage of service sector. Inflation based on implicit GDP deflator is more comprehensive measure of underlying inflation for this sector. Comparative picture of inflation for manufacturing and service sector based on implicit GDP deflator is indicated below: 

The non-food manufacturing product (excluding urea fertilizers) and petroleum products (except kerosene, LPG and diesel) are tradeables. Domestic prices for these products are governed both by domestic availability of these products and the global commodity prices. Inflation for food, fuel and manufactured products often gets generalised resulting in higher inflation for services sector also.

Besides the monetary measures which operate on demand side, Government has been taking steps to reduce supply related bottlenecks. Since the production and investment in these sectors is largely dependent on the business expectation and conductive investment climate, Government has taken various measures to improve business sentiments. It has also announced a road map for fiscal consolidation and has reduced uncertainty/apprehension relating to some of the provisions of the tax policy. Regulatory clearances for major projects are also being expedited to improve investment and production capacity in non-food manufacturing sectors. While no target has been set for a level of inflation for manufacturing and service sectors, these measures are expected to contain inflation.

This was stated by the Hon’ble Minister of Finance Shri P. Chidambaram in a written reply to a question in the Rajya Sabha today.

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DSM/RS/ka

Inflation monitoring via GDP deflator prompts fiscal, monetary and administrative actions to contain service and manufacturing inflation. The Government monitors inflation with price stability as a priority and uses fiscal, monetary and administrative measures to contain it; sectoral GDP deflators are preferred for measuring service sector inflation because WPI and CPI partially cover services. Recent sectoral deflator data show services inflation exceeding manufacturing in the cited periods. Policy responses address both demand and supply: monetary measures plus supply side steps such as improving business sentiment, expediting regulatory clearances, announcing a fiscal consolidation roadmap and reducing tax uncertainty. These measures are expected to contain inflation, and no explicit inflation targets for manufacturing or services are set.