Rate cut hopes hit by rising inflation

After the slump in industrial production and merchandise exports, the UPA government is about to sign off with significantly high inflation as well. 

Both wholesale and retail inflation data for March, which showed higher food prices, remain the primary culprits, calling for urgent augmentation of supply side measures by the new government.

 

Official wholesale inflation for March rose 5.7 per cent while retail inflation shot up to 8.31 per cent.

Inflation for food items based on wholesale price index shot up 9.9 per cent in March as against 8.12 per cent the previous month. 

 

Price rise for potato was close to 28 per cent, rising sharply from 8.36 per cent in February. 

 

The higher inflation comes on the back of weak data for factory ouput and exports. 

 

RBI, which aims to bring retail inflation to 6 per cent levels by 2016, has raised lending rates three times since September.

 

Rapidly upward moving inflation may tie its hands this time too, experts opine.  

 

Inflation in fuel and power category (LPG, petrol and diesel) rose to 11.22 per cent from 8.75 per cent in February.

 

Retail inflation in March spiked to 8.31 per cent from 8.03 in February.

 

Overall inflation in the food basket, including beverages, increased to 9.1 per cent in March from 8.57 per cent in February.

 

Vegetable prices for retail buyers increased 16.8 per cent in March from 14.04 per cent in February.

Prices of fruits rose 17.19 per cent. Retail or consumer inflation in protein-rich items such as eggs, fish and meat eased to 9.54 per cent in March from 9.69 per cent in February.