Driven by increase in prices of food and manufactured goods, inflation soared to 8.98 per cent in March raising fears of yet another hike in key policy rates by the Reserve Bank next month.Headline inflation, measured by movement in wholesale prices, at near 9 per cent in March was much above the RBI”s projection of 8 per cent. As a result, experts feel the central bank may take further steps to tame rate of price rise at its annual policy to be announced on May 3.
As per the official data, food articles group became expensive by 9.47 per cent, cereals by 3.96 per cent and, rice and wheat by 2.69 per cent and 0.75 per cent, respectively.
The manufactured goods group index rose by 6.21 per cent on an annual basis. Manufactured items have the highest weight of 64.9 per cent in the WPI.
Despite the eight consecutive hikes in key policy rates by the RBI since March 2010, inflation has continued to remain significantly above the comfort level of 5-6 per cent.
“Inflation has been a concern. It has not come under control as much as I had hoped. There is a need to use fiscal and monetary policy to get rid of supply constraints wherever they exist,” Planning Commission Deputy Chairman Montek SIngh Ahluwalia said.
Further, the inflation for January was revised upwards to 9.35 per cent, from the provisional estimates of 8.23 per cent. This also points to a greater possibility that the March end numbers could be revised upwards.
As per the official data released here today, prices of primary articles — food, non-food articles and minerals — shot up by 12.96 per cent on an annual basis.
“We expect that the RBI would increase the repo and reverse repo rates by 25 basis points in the upcoming policy review despite the recent sluggishness in IIP growth,” ICRA Economist Aditi Nayar said. IIP growth in February slowed to 3.6 per cent, from 15.1 per cent in the year-ago period.
Experts said inflation focus is now shifting from food to manufactured items. They feel that even as food inflation is coming down, the headline inflation is going to stay high for some time.
“From a policy perspective, non-food inflation is very critical and it is rising. Looks like inflation will remain high this year,” Crisil Chief Economist D K Joshi said.
He said there could be further rise in inflation if the impact of rise in global crude oil prices is passed on to consumers.
The global Brent crude is currently hovering around USD 110 a barrel on account of unrest in Middle East, though there has been no hike in domestic petrol or diesel prices in the month of March.