High liquidity injection, rising food prices and the possible increase in oil and commodity prices may push inflation upwards in double-digits next fiscal and may put policy makers in a fix, Edelweiss Securities said.
"We see a possibility of Wholesale Price Index (WPI) inflation reaching 6-7 per cent with an upside risk by March 2010 and also acknowledge the possibility of it touching double-digits again in FY'11," Edelweiss said in a research report.
"... Continued high global liquidity infusion and possibility of greater pass-through of oil and commodity prices may significantly push inflation beyond the current expectation over the next 9 to 12 months," Edelweiss economist Siddhartha Sanyal said, adding that food prices have been continuously on the rise, as reflected in the high CPI level.
Notwithstanding the current sub-zero level inflation in the country and the global slowdown, the research firm said it believes there could be overheating of prices putting policy makers in a fix.
The WPI-based inflation for the week up to June 6 was minus 1.61 per cent on high base effect, tumbling from a 16-year high of 12.91 per cent in early August last year.