New Delhi: Pushed by higher food prices, wholesale price inflation is rising at a faster pace than expected and could be more than 7% by the end of current fiscal, say experts.
If that happens, inflation would be much more than 5% as projected by the Reserve Bank, which is facing the tough task of tackling inflationary pressures and promoting growth. The central bank’s monetary policy review is slated for 27 October.
Yes Bank chief economist Shubhada Rao said: “it (inflation) is moving at faster pace than anticipated. At this rate, there is a likelihood that it may rise above 7% by March 2010.”
Continuing its upward trend, wholesale price inflation inched closer to the 1% mark at 0.83% for the week ended 19 September mainly due to increase in food prices.
In the wholesale market, the annual rise in potato price was about by 81.18%, while sugar jumped 44.47%, according to government data.
Similarly, vegetables rates soared by 49.44% and pulses by 20.05% in the review period.
Rating agency Crisil’s Principal Economist D K Joshi said inflation is moving upwards at a quicker rate and is likely to touch 7% mark by the end of current fiscal.
However, Joshi said, RBI is likely to maintain a neutral stance in the 27 October policy as growth is a primary concern.
RBI governor D Subbarao has said the central bank would strive to promote growth and control inflation in the monetary policy.
“We will take into account a complete picture of the macro-economic situation to decide the monetary policy in order to support the economic recovery and the issue of controlling inflation,” Subbarao had said after the RBI’s board meeting.
Also, the government’s commitment for not withdrawing stimulus packages “prematurely” will not allow the RBI to reverse its policy stance and signal a hike in interest rates to tame inflation.
Commenting on the price rise, finance minister Pranab Mukherjee has said rising inflation is a matter of concern.
“I have told earlier also that there is an inflationary potentiality and inflation may go up. Naturally, whenever it goes up, it’s a matter of concern but at the same time the type of situation which developed cannot continue,” he said.
Chief economic advisor Arvind Virmani expects inflation to be higher than RBI’s current projection and pegged it at around 6% by March-end.
“Point-to-point WPI is expected to be around 6 per cent by March-end...certainly the fact that inflation is relatively high in Consumer Price Index-Industrial Workers is a matter of concern. There is no doubt about it.”
Consumer price index (industrial workers) inflation stood at 11.72% in August.