Mumbai: Goldman Sachs has lifted its inflation forecast for India for the next fiscal year to 6.7% from the earlier 6%, citing higher global commodity prices and upside surprises in agricultural prices.
The investment bank, however, expects the country’s inflation to peak during April-June.
The Reserve Bank of India (RBI) has raised rates seven times since March, although monetary policy is expected to have only a limited impact on reining in supply-side driven food inflation.
Goldman said it expects a further 75-basis point hike in key rates by India’s central bank in 2011, adding it was underweight on Indian stocks and bearish on the currency.
“A critical concern for investors in Indian assets is sustained high inflation,” analysts Tushar Poddar and Vishal Vaibhaw said in a research note.
The partially convertible rupee trading at 45.42 per dollar is down about 1.3% so far this year, while the domestic stocks are down nearly 14% on waning foreign fund interest.
Earlier this month, Prime Minster Manmohan Singh said high headline inflation is beginning to pose a serious threat to the countries high growth plans, in one of his strongest warnings over the risk of rising prices.
Headline inflation accelerated to 8.43% in December on the back of high food inflation, which had reached a one year high of 18.3% at end-December.