India is not alone where inflation is surging ahead. In China, inflation has hit nearly 12-year high of 8.7 per cent in February, while Hong Kong has registered the fastest pace in the rate of price rise since 1977. Wholesale prices-based inflation rate surged despite high base of 6.51 per cent a year-ago.

Sluggish growth

With inflation just short of six per cent mark, it may not allow Reserve Bank of India to cut interest rates despite sluggish industrial growth, analysts said.

The latest spurt in wholesale-based inflation, which stood at 5.11 per cent in the previous week, has given rise to apprehension that Reserve Bank of India (RBI) is unlikely to soften its monetary policy. As a result the possibility of banks reducing the overall interest rates appears remote. The RBI is scheduled to review the credit policy next month. In view of rising inflation Finance Minister P Chidambaram has already indicated that the Reserve Bank might not go for interest rates cut to boost the industrial production.

“As long as there is a threat of inflation, RBI has to make use of policy on interest rates in order to contain inflation and dampen inflationary expectations. You have to trust RBI,” Mr Chidambaram has recently said, observing the very purpose of fixing policy interest rates is to contain inflation.

Significantly Prime Minister Economic Advisory Council Chairman C Rangarajan has said rising inflation rate does not favour interest rates cut policy. Mr Rangarajan’s statement had come when inflation rate was 5.11 per cent.

With the figures, released on Thursday, a possibility of such cuts have become more remote, analysts said.

Last week, Mr Chidambaram had said “we are ready to take any fiscal step to keep inflation under check.” The government was willing to take measures on monetary and other front as well, he had said, pointing out that international and national factors have contributed to the rise in the rate of inflation to nearly five per cent now from a low of 3.11 per cent.

The inflation rate for week ended January 12 has been revised to 4.36 per cent from provisional estimate of 3.83 per cent as the wholesale price index finally stood at 217.8 points compared to earlier estimate of 216.7 points.