Mumbai: The country may see inflation touch the 6% mark by June-July as global prices of crude oil, food items and commodities continue to surge, economists believe.
High oil, food and commodity prices have been fuelling inflation and with the likely continuation of this trend over the next few months, any hope of policy rate cuts by the Reserve Bank of India (RBI) in the near term has all but evaporated, they said.
“There is a tremendous upward pressure on inflation and I see it inching close to the 6% mark by end-June,” Bank of Baroda’s chief economist Rupa Rege Nitsure said.
A continuous rise in inflation over the last two months has seen it breach RBI’s projected level of 5% last week. Inflation stood at 5.11% for the week ended 1 March, as against 5.02% for the previous week.
High global oil prices at around $110 (Rs4,455) per barrel have contributed significantly to fuelling inflation, along with rising food, edible oils and commodity prices.
“I expect inflation at around the 5.5% level next month. Rising commodity and food prices will definitely pressurize inflation but much will depend on how oil prices move,” said D.K. Joshi, director and principal economist, Crisil Ltd.
Economists see a limited role for monetary policy in reigning in inflation. “I expect the government to use administrative and fiscal tools to control inflation because the present rising inflationary trend is mainly due to supply-side problems,” Enam Securities Pvt. Ltd’s chief economist Sachichidanand Shukla said.
Shukla expects the government to effect excise and customs duty cuts on some items as a part of its fiscal initiatives to rein in inflation.