Inflation likely to ease by year-end: Economic Survey

"The WPI inflation is expected to moderate by the end of 2014," the survey released a day ahead of the national budget said.

However, there are risks to the outlook for inflation from a possible sub-normal monsoon during 2014-15 as predicted by the India Meteorological Department on account of the El-Nino effect, a possible step up in the pass-through of international crude oil prices and exchange rate volatility, it added.

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According to the survey, the average wholesale price-based inflation fell to a three-year low of 5.98 percent in the financial year ended March 31, 2014 as against 7 percent and 9 percent posted in the previous two years respectively.

Consumer price-based inflation, though higher than the WPI, has also exhibited signs of moderation. It declined from 10.21 percent in 2012-13 to about 9.49 percent in 2013-14.

Food inflation, however, remained stubbornly high during the financial year 2013-14, reaching a peak of 11.95 per cent in the third quarter.

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"High inflation, particularly food inflation, was the result of structural as well as seasonal factors. Contribution of the commodity sub-groups, 'fruits and vegetables', as well as 'egg, meat and fish' to the food inflation has been very high," the survey report said.

Inflation in non-food manufactured product (WPI core) has remained benign throughout the year, with average inflation moderated to a four year low of 2.9 percent in 2013-14, which indicates that underlying pressures of broad-based inflation have somewhat eased.

The International Monetary Fund (IMF) has projected that most global commodity prices are expected to remain flat during 2014-15, which augurs well for inflation in emerging markets and developing countries including India, the report said.

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