Inflation soars, price rise beyond foodgrains

So far, it was food that was pushing up inflation rates in India. Now, manufactured goods such as chemicals and machinery, and a spike in sugar, are adding to the price fire.

Inflation can touch 10% in March after shooting past the Reserve Bank of India’s forecast of 8.5% by March-end in January itself, economists said. There is hope, though: there is a chance the rise may peak out around June-July, said  other experts.

On Monday, the ministry of commerce said the wholesale price index or WPI-based inflation touched 8.56% in January, driven by an across-the-board increase in prices.

Any increase in the prices of petrol and diesel — something that
has been talked about recently — will only push up inflation. But sources said the government is unlikely to make a move until after the Union Budget on February 26.

“WPI inflation can possibly touch double digits in March, as inflationary pressures in non-food manufactured products and non-administered fuel categories are picking up. They can negate any easing of food prices. And, if we see a hike in prices of petrol and diesel before or during March, then the possibility of double-digit inflation goes up even more,” said Gaurav Kapur, senior economist at ABN Amro Bank.

What led to a further rise in January?
“The main pressure continues to come from food. Prices of fuel and manufactured products also contributed to its rise,” said Dharmakeerti Joshi, principal economist at credit rating agency Crisil.

“The key to controlling inflation is the proper distribution of buffer stock of grains by the government,” said Siddhartha Sanyal, economist, Edelweiss Capital. The state government should also ensure that there is no hoarding by anyone, he said.

The projection for February is inflation between 9% and 9.5%.
“Headline WPI inflation can rise to 9.2% in February on low base effect itself,” said ABN Amro’s Kapur.