Inflation seen at 12.82 pct on Aug 16

Written by Reuters | Mumbai, August 27: | Updated: Aug 27 2008, 19:39pm hrs
India's annual inflation rate is expected to have risen closer to 13 per cent in mid-August, driven by higher prices of some foods and other commodities and resilient demand, a Reuters poll showed on Wednesday.

The wholesale price index is forecast by 11 economists to have risen 12.82 per cent in the 12 months to Aug.

16, which would be the highest since annual numbers in the current series began in April 1995.

It rose an annual 12.63 per cent a week earlier.

"We expect WPI inflation to increase to 12.82 per cent year-on-year from 12.63 per cent in the previous week, due to higher prices of food articles, rubber, sugar, paper products, oilseeds, textiles, rubber and plastic products," said Sonal Verma, an economist at Lehman Brothers.

The data is due around 6 p.m. on Thursday.

It would be the 27th consecutive week the inflation rate has been above 5.5 per cent, the Reserve Bank of Indias original target for inflation at the end of the fiscal year in March 2009.

At a policy review in late July the Reserve Bank of India raised its key lending rate by 50 basis points to 9 per cent and also increased banks' reserve requirements, and said it was now aiming to bring inflation down to 7 per cent by the end of March.

The government has said the inflation rate would hit 13 per cent and thereafter start moderating from December, before settling at 8.0-9.0 per cent by the end of the fiscal year in March.

A slide in prices of oil, India's biggest import, to around $117 a barrel from a record high above $147 in mid-July, is expected to ease the pressure on inflation.

However, analysts said pressure from primary articles and strong demand despite the several rounds of policy tightening would most likely propel inflation higher for some months.

"Two indicators show that demand as of now is strong: non-food credit and manufactured product prices," said Shubhada Rao, chief economist at Yes Bank.

The wholesale price index is more closely watched than the consumer price index (CPI) because it includes more products and is also published weekly.