The rise in prices accelerated in December, with inflation jumping to 8.43 per cent mainly due to the high cost of food items.
Economists now almost uniformly believe that the Reserve Bank will hike interest rates once again by at least 0.25 per cent in January itself to curb inflation. Since the
start of the new year, the markets have been hit by fears of an imminent interest rate hike as this will adversely hit the profitability of companies. The Sensex on Friday dipped below the crucial 19,000 level for the first time in four months after the release of inflation data due to heavy selloff by funds.
While overall inflation stood at 8.43 per cent in December, food inflation — which is what hits the common man the most — was 16.91 per cent for the week ending January 1.
Finance minister Pranab Mukherjee admitted on Friday that food inflation “at this level is not acceptable”.
He hopes to control it with the help of the states, and will meet state finance ministers at a pre-Budget meeting on January 19.
Economists, however, do not expect inflation to fall any time soon. Infact, a Citi India report on Friday said that inflation is likely to remain high at 6.5 to 7 per cent in the next fiscal too.