The Reserve Bank of India is likely to revise upwards its inflation forecast for the current financial year. The RBI had expected inflation, the rate at which prices increase, at 5.5 per cent by March 2011. However, with the wholesale price index rising by 10.16 per cent for May, the central bank may have to revisit its earlier estimates.
“Earlier, we expected the inflation rate to come down to 5.5 per cent by March 2011. We projected this number in our earlier meeting. We will revisit that number in the July policy meeting,” governor D. Subbarao said in Hyderabad on Friday.
“We have inflation numbers for May, that was 10.16 per cent. But, more importantly, the numbers for the previous month were revised. So it’s the case now that we have double-digit inflation for two months in a row,” he added.
Apart from the wholesale price index, food price inflation has also been in the high teens for several months. Part of it is due to the base effect — last year, prices at this time were depressed below normal levels.
The government had hoped a strong winter harvest would help bring down food prices and overall inflation. That hasn’t yet happened. High inflation is also cited as one of the reasons the Central government has delayed a decision on hiking fuel prices.