Inflation may soar to 10 per cent in India by March 2010 due to rising prices of manufacturing goods and food, according to industry lobby Assocham.
The fact that inflation is starting from a low base will add to the problem. The Wholesale Price Index (WPI) will keep rising to touch the 252-mark on March 27, 2010, and inflation will reach 10 per cent, the Associated Chambers of Commerce and Industry of India (Assocham) predicted in a report.
The WPI inched to 1.21 per cent for the week ended Oct 10, highest since May 30. The build-up in inflation between March 28 and Oct 10 is 5.95 per cent.
According to Assocham, the high base established during January-September 2008 had caused negative or low inflation during the like period this year and now this low base will cause higher inflation in the coming months.
The strong build-up has been observed in the category of primary articles. Food articles have shown 14.13 per cent inflation during the period.
"Although there is a hope that with the kharif crop coming to the market, food prices will start cooling off, we believe the impact may not be much significant to offset the increasing prices," Assocham said.
It is estimated that the significantly deficient (about 20 per cent) monsoon performance could impact kharif production by about 15-20 per cent, it added.
Assocham warned that rising commodity prices is a matter of concern for the economy.
The prices of aluminium have increased almost 23 per cent, while sugar prices have gone up nearly 90 per cent in the last three months.
Crude prices surged nearly 10 per cent and the prices of copper have also skyrocketed about 111 per cent, the industry lobby said.
Though inflation is expected to rise, said Assocham, the Reserve Bank of India should not "unwind its easy money policy in a hurry".
"As the government has to borrow large amount to finance the high fiscal deficit (6.8 per cent), any knee-jerk reaction on inflation could cause sharp rise in interest rates and crowding out of private investments," it said.