Wholesale price index (WPI) inflation will continue to move higher in the next few months, albeit not at the same pace, reaching 8% as the lagged effects of higher international food and energy prices continue to come through, said Robert Prior-Wandesforde, senior Asian economist of global markets with HSBC.
?WPI inflation could hit 8% assuming that both oil and food commodity prices remain flat at their current levels in rupee terms. Our analysis is that India will either need to see the Indian rupee strengthen much further or international commodity prices drop in level terms if headline WPI inflation is to begin retreating in a meaningful fashion over the coming year,? said Wandesforde. Wandesforde pointed out that a further upside risk to both WPI and CPI inflation stems from the implementation of the Sixth Pay Commission, that has recently revealed its recommendation for one-day off pay rises of up to 77% for more than 3 million central government workers. HSBC is also of the view that going forward, GDP growth should continue to soften through 2008, eventually slipping slightly below 7% in the second half of the calendar year.
