CII notes the decline in inflation to 7.25% in June 2012 from 9.51% during the same period last year. While this is an improvement over the same period last year, the high food and fuel prices have been the major contributors for June inflation and CII strongly recommends policy initiatives to ease the supply side bottlenecks in agriculture by delisting perishables from the APMC Act, permitting farmers to directly sell their produce in the market and open up FDI in retail. There is also need to address the problem of fuel inflation, which has been compounded by the recent rupee depreciation, by permitting oil companies to access Foreign Exchange requirements for Oil imports directly from the RBI through a special window.

As manufacturing inflation remained stable and inflation is on the declining trend since last year, the RBI should cut interest rates in its forthcoming monetary policy review, which in turn would prop up industrial growth and revive the virtuous cycle of growth and spruce up business sentiments which would help arrest the rupee depreciation and help reap the benefits of declining global commodities' prices.