The headline inflation is expected to stay above the 7% level till the end of December according to a recent survey conducted by the industry body Ficci. Out of the 317 companies surveyed by the chamber, majority of them felt that the current rise in inflation is largely due to factors that cannot be really influenced by the monetary policy measures. Rising oil prices, rising commodity prices and rising food prices are a global phenomenon and these cannot be influenced through the monetary policy.
The Ficci survey on inflationary expectations reveals that the industry is under tremendous cost pressure on account of rise in the price of raw materials, rise in the price of oil and oil products, rise in power costs, rise in wages and salaries and rise in interest burden. All these factors together have put a huge dent on the margins and on the operating performance of the companies forcing many of them to partially offset this pressure through an increase in prices.
Both the government and the RBI have taken several fiscal, administrative and monetary measures to rein in inflation. While the results of these measures would become evident in a few months time, the findings of the present Ficci survey show that there is a strong feeling amongst members of Indian industry that inflationary pressures would be maintained and possibly rise further in the near term.
Nearly 68% of the respondents feel that the current inflation rate would be either maintained or it would further increase over the next six months. While 38% of the respondents feel that inflation will continue be in the range of 7% to 8% six months from now, another 19% feel that inflation rate would be in the range of 8% to 9%. About 6% of the survey participants feel that inflation would be in the range of 9% to 10% six months from now.
Out of the responses received for the interest rates, 50% of the participants feel that interest rates should go down. While another 37% feel that interest rates should stay at the present level, about 14% of the survey participants feel that interest rates should go up.
