It was expected that with a normal monsoon during 2010–11, food inflation would moderate. But, contrary to expectations, the major driver of inflation in this period was food. In fact, inflation in cereals, pulses and vegetables was significantly lower in July 2010 as compared with the March 2010 levels indicating that the good monsoon indeed had a moderating impact on these items.
The new convergence programme which was recently presented to and accepted by the Ecofin Council envisages a further tightening of fiscal policy, targeting a general government deficit of 1.2% of GDP for this year and a primary surplus of 6.7%. For 2001, the target deficit is 0.2%, followed by a small surplus in the following year.