The Government today said inflation continues to remain a concern, but exuded confidence that the RBI’s monetary policy will lead to moderation in inflation numbers in the coming months.

“But it (inflation) clearly remains a concern... But I expect the policy taken by the RBI to further moderate inflation in coming months... Average inflation to be lower next year,” the Finance Minister, Mr Pranab Mukherjee, said while presenting the Budget for 2011-12.

He, however, said that inflation, especially high food prices, continue to worry and also called for improvement of distribution and marketing systems to bridge the gap between wholesale and retail prices.

“... Difference in wholesale and retail prices is not acceptable,” Mr Mukherjee said.

Regarding food inflation, he said: “The total food inflation declined from 20.4 per cent in February, 2010, to less than half, at 9.3 per cent in January, 2011.”

Mr Mukherjee also emphasised on increasing agricultural productivity to curb food inflation.

The government and the RBI have been under pressure due to inflationary pressure, particularly of food products.

The RBI has hiked short-term lending and borrowing rates six times during the current fiscal, including a hike of 25 basis points in its third quarterly review in January.

The Government had earlier said it expects inflation to fall to around 7 per cent by March-end and dip to around 5-6 per cent by the middle of the year.

However, the Economic Survey released last week said the high growth rate would also affect inflation, which would be 1.5 per cent more than what it would have been otherwise.

The Survey had also said that high global commodity prices, particularly crude prices, are going to be affected due to the turmoil in West Asia and this may affect the domestic trend also.

Headline inflation has been above 8 per cent since February, 2010. It was 8.23 per cent in January this year. Food inflation has been in double digits for the most of the current fiscal. According to the latest data, food inflation stood at 11.49 per cent for the week ended February 12.

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