Though the Reserve Bank of India (RBI) has targeted to keep inflation within the range of 5% for the year, economists across banking and corporate circles are of the view that this may be difficult.Going forward, they are of the view that inflation may, in fact, cross 6%.
?Inflation at 5.92% was beyond our imagination. Hike in iron and steel prices were the biggest movers of inflation this time. Commodity and food prices have also contributed maximum to the domestic inflation data,? said Samiran Chakraborty, chief economist, ICICI Bank.
?Controlling inflation within 5% is going to be a tough job for the central bank, unless stern action is taken. The base effect is also not favoring the inflation numbers,? said Chakraborty, adding that it may touch 6.25% next week.
There is a slowdown in the manufacturing sector and oil prices are very high. Food prices will continue to be high, thus contributing to higher inflation. One must be prepared for inflation above 6% for the next 2-3 months,? said TK Bhaumik, chief economist, Reliance Industries.
?The government is trying to manage inflation through fiscal measures rather than monetary measures. This is an indirect measure the government is going for to curb inflation,? added Bhaumik. .
However, Chakraborty pointed out that if fiscal measures like banning of exports and cutting of import duties would prove successful in controlling inflation, monetary measures like a rate hike would not be necessary.
However, V Shanmugam, chief economist of Multi-Commodity Exchange (MCX) felt that the rise in inflation is just temporary.
?There has been a shortage of food items globally. Moreover, the low base effect last year is resulting in higher inflation numbers this year. However, this is just a temporary phase,? Shanmugam said.
The Wholesale price index (WPI) rose by a whopping 0.81% to touch 5.92% during the week ended March 8, as metals namely iron and steel prices soared and prices of food items turned expensive.
During the week, basic metals, alloys and metal products group rose by 6.7% while prices of blooms and billets and slabs went up by 30%, wires by 25%, steel and tensile plates by 20%, while bars and rods by 3%.
Among food products prices of gram and moong went up by 3% while fruits and vegetables, maize, and condiments and spices were expensive by 1%.
Commerce and industry minister Kamal Nath yesterday said the government was considering duty cuts on imports of palm oil. The government also announced a ban on export of all edible oils with effect from March 17, for one year to curb their rising prices.