Prices may go up further in July, but will cool by December: Montek

Inflation will rise further in July as the fuel price hike gets fed in the July numbers but it will come down at the end of the year, Planning Commission deputy chairman Montek Singh Ahluwalia said

The plan panel today said fuel price hike will further increase inflation in July, but it will fall below double digits by the end of December, reports PTI.

"I think although there will be an adjustment upward (in inflation) when fuel price hike gets fed in July numbers... I don't alter my conclusion that at the end of the year it will be low," Planning Commission deputy chairman Montek Singh Ahluwalia told reporters on the sidelines of an Indo-Oman event.

He said that inflation will be well below double-digit by the end of this year.

For June, wholesale price-based inflation inched higher to 10.55% against 10.16% in May.

He said the number seems to be consistent with the sort of cautious optimism we have been expressing.

"You will see more decline as time goes by," he said.

Mr Ahluwalia said high inflation cannot be avoided by not adjusting fuel prices.

"This will result in huge losses to oil marketing companies. You will cover these losses by hidden subsidies that would generate inflationary pressure," he said.

In 2009-10 the government had borne a loss of over Rs1 lakh crore due to subsidies on diesel, liquefied petroleum gas (LPG), kerosene and petrol.

On 25th June, the government had hiked petrol prices by Rs3.5 a litre while deregulating its pricing, and diesel by Rs2 a litre. Besides, it raised prices of LPG (cooking gas) by Rs35 a cylinder and kerosene by Rs3 a litre.

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SBI, Oman's SGRF to set up $100 million equity investment fund

The fund, which will explore opportunities in all sectors, will be expanded to $1.5 billion in due course

The country's largest lender State Bank of India (SBI) and State General Reserve Fund (SGRF) of Oman today said they will jointly set up a fund with an initial corpus of $100 million (about Rs450 crore) for making equity investments in India, reports PTI.

SBI and SGRF inked a joint venture agreement to establish a fund, which will be expanded to $1.5 billion in due course.

The fund will explore opportunities in all sectors, according to the agreement.

The initial corpus will be contributed equally by SBI and SGRF and both sides will manage the fund jointly.

On the occasion, finance minister Pranab Mukherjee said that the agreement would be a landmark and will open new vistas in economic relations between India and Oman.

Oman's minister of national economy Ahmed Macki said the fund will start immediately.

The two sides had reached an understanding for setting up the fund during the visit of prime minister Manmohan Singh to Oman in November 2008.

The Sultanate of Oman is keen for diversifying its oil and gas industry-based economy to a modern industrialised economy and for the purpose the country needs investment in manufacturing, tourism as well as warehousing and other allied industries.

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Inflation will slow after harvest: FM

"It is 10.55%. After the kharif season is over, there will be a moderating impact which is already being felt," finance minister Pranab Mukherjee said

Attributing the double-digit inflation to the petro hike, finance minister Pranab Mukherjee today said that prices would moderate by the end of the kharif season, and inflation would come down to 5%-6% by the year-end, reports PTI.

"I do feel that the annual rate of inflation will be 5%-6% (by 2010-end)," Mr Mukherjee told reporters on the sidelines of a function relating to the setting up of an investment fund between India and Oman.

Wholesale price index (WPI) based inflation inched higher to 10.55% in June, owing to the pass-through effect of the hike in prices of petroleum products announced on 25th June.

"It is 10.55%. It is hovering around double digits. After the kharif season is over, there will be a moderating impact which is already being felt," he said.

Inflation figures in June were expected to move up due to the impact of the petro price hike, he added.

The minister had earlier said that the fuel price hike would impact WPI inflation by less than a percentage point.

The government had, on 25th June, hiked petrol prices by Rs3.5 a litre while deregulating them, and diesel by Rs2 a litre. Besides this, it raised the price of LPG (cooking gas) by Rs35 a cylinder and kerosene by Rs3 a litre.

The sowing of kharif crops began in June, with the onset of the South-West monsoon, and will continue till September. The crops will start arriving in October.

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