By March end inflation will fall to 6-7 percent: FM

New Delhi: Encouraged by a sharp dip in December inflation, Finance Minister Pranab Mukherjee today said the declining rate of price rise indicates improvement in macro-economic parameters and projected March-end numbers at 6-7 per cent.

Headline inflation, as measured by Wholesale Price Index (WPI), fell to a two-year low of 7.47 per cent in December 2011, from 9.11 per cent in the previous month.

"Headline inflation should be between 6 and 7 per cent in March end 2012," Mukherjee said, adding that he is confident that moderation in inflation would continue in the coming months.

As per the official data, prices of food items rose at a lower rate of 0.74 per in December, compared to 8.54 per cent expansion in the previous month.

The decline in the December inflation, he said, is "mainly due to significant decline in inflation for primary articles, including food inflation."

Mukherjee said good industrial production numbers for November at 5.9 per cent and a sharp decline in inflation "indicates some improvement in the overall macro-economic parameters in the second half of 2011-12."

"This trend is likely to consolidate in the coming months with some policy correctives," Mukherjee added.

Prices of manufactured products, which account for 65 per cent in the WPI basket, went up by 7.41 per cent year-on-year in December, as against 7.70 per cent in the previous month.

"The manufactured inflation and inflation in the power group of items … continued to be a cause of concern," Mukherjee said.

He added that the softening in prices of manufactured goods would be gradual, even as non-food primary inflation is witnessing rapid decline.