“Higher-than-expected” rise in WPI-based inflation in December has prompted the Prime Minister's Economic Advisory Council (PMEAC) to further revise upwards March-end inflation forecast to up to 7% from 6.5% estimated earlier.
“March-end we had originally thought, it would be around 6.5%, but given the current trend, it could be anywhere between 6.5% and 7%," said C Rangarajan, chairman, PMEAC.
Overall inflation for December, measured on the basis of wholesale prices, increased to 8.43% in December from 7.48% in November, mainly due to an increase in food prices.
The PMEAC had earlier estimated March-end inflation at 5.5%, which was revised to 6% and subsequently to 6.5%.
The present situation warrants some tightening on the part of the Reserve Bank of India in its January 25 quarterly monetary policy, Rangarajan said. “The inflation rate for December has turned out to be much higher than what was originally expected... Given the present situation, perhaps some tightening on the part of RBI may be required.”
The RBI raised key policy rates six times last year.
Food inflation remained high through December touching the year-high level of 18.32%.
Vegetables, fruits, eggs, meat and fish prices have contributed to the rise in inflation, he said. However, seasonal factors and measures taken by the Centre could lead to a decline in price rise level in the coming weeks.