RBI on Friday responded by pushing up the cash reserve ratio by 50 basis points and the repo rate by 25 basis points. It has remained at this level for the past three weeks, despite a slew of measures taken by the government and the Reserve Bank of India (RBI) to bring it down.
Last week, finance minister P Chidambaram claimed the average annual inflation level for this fiscal was likely to be 5.4%. The RBI had projected an annual inflation level of 5-5.5%.
The high inflation is fuelling speculation of overheating in the economy and lower growth rate for the next fiscal. Rising inflation is being cited as one of the major factors for cautious projections by rating agencies like Crisil, Icra and multi lateral agencies like the ADB.
While the prices of primary articles such as wheat, arhar, barley, fruits and vegetables have declined, the prices of poultry, chicken, bajra, masur, fish-marine and jowar have risen considerably. The prices of edible oils too have shot up.
Minerals like fluorite, ochre and magnesite have also witnessed a price hike of about 22% to 23%.