New Delhi: Inflation, which crossed the 1% mark for the week ended 10 October after seven months, is likely to surge to 10% by March end driven by surging food prices, low base effect and rising manufacturing costs, industry body Assocham said.
However, the industry chamber wants the government to keep soft monetary stance, adopted during the global financial meltdown, unchanged as it feels that the resultant rise in interest rates could hurt private investment.
It said, as the government has to borrow large amount of money from the market to finance the high fiscal deficit, estimated to be 6.8% of GDP this fiscal, the knee jerk reaction on inflation could cause sharp rise in interest rate scenario and crowding out of private investments, it added.
Assocham said that although there is a hope that with the kharif crop coming to the market food prices will start cooling off but the chamber believes the impact may not be much significant to offset the increasing prices.
It is estimated that the significantly deficient (about 20%) monsoon, which has hit half of the country, could impact kharif production by about 15-20%, it said.
The rise in crude oil prices and other commodities such as copper, aluminum and manufacturing articles have started moving up swiftly during the recent weeks, it added.
Meanwhile, the Prime Minister’s economic advisory panel and business information provider, Dun & Bradstreet (D&B) have also said inflation may cross the 6% mark by March.