THE rate of inflation has soared into the double digits. This has set alarm bells ringing. News channels beam the bad news into homes through the day and this creates a pervasive sense of gloom. Double digit inflation has been associated with the collapse of economic growth. Many wonder whether the present bout of inflation augurs the end of the high growth phase of the past five years. These apprehensions are unfounded. There is every reason to expect the rate of inflation to subside in the coming months although we may have to wait until September to see a meaningful reduction. Economic growth remains pretty much on track. Corporate earnings may see some slowdown but not as much as feared. These propositions need elaboration. To begin with the current rate of inflation, this certainly has to do with the base effect. In May-August 2007, the wholesale price index remained virtually unchanged going by monthly averages. At a time of rising food, oil and metal prices, this is bound to result in a spike in the inflation rates in the corresponding months this year. We are already seeing a moderation in food prices thanks to a good rabi crop, terrific success in food procurement and a slew of administrative measures. If the kharif crop turns out to be good, as is expected, food articles should cease to be a contributor to rising prices. Remember, it is a rise in food prices that are the primary concern to the vast majority of people and hence politically explosive. As for metal prices, we can expect a good portion of the rise to be absorbed by the end-user industries. India's corporate sector has been growing profits annually at an incredible 45% over the past four years. There is enough room for end-user industries to absorb the increase in prices of intermediate products. That leaves oil prices. True, there is no dearth of doomsayers on this subject. But, as I argued a few weeks ago, the imbalance between supply and demand is still quite small