Brace yourself for a prolonged spell of high inflation, as there is no sign of a let-up on the price front after the 9.4% inflation rate — the highest in 16 years — clocked in 2010-11.
Despite weathering the worst economic downturn in eight decades, the government faces yet another challenge of spiralling prices, as cheap money and surging demand make fighting the price monster more difficult.The RBI is expected to raise interest rates in its monetary policy review on May 3 — the ninth time in 13 months. So, expect EMIs on home loans to go up.
“We expect a one percentage point hike in RBI policy rate till September to rein in inflation,” Samiran Chakraborty of Standard Chartered Bank said.
Crude prices are above $120 a barrel, with indications they will rise further. Oil companies plan to raise petrol and diesel prices next month when assembly elections conclude.
“The second-round effects of such increases on transport costs would create further upward pressure,” Chakraborty said. “Kerosene and cooking gas price increases are also overdue and could coincide with diesel price hike.”
As a last resort, all eyes will be on the monsoon – crucial for the kharif (summer) crop that accounts for two-thirds of food grain production. “The monsoon is most likely to be normal,” Met department chief Ajit Tyagi said.
Meanwhile, the government has been trying to talk inflation down for the past year. “I would expect inflation to be less than 8% in April,” chief economic advisor Kaushik Basu said. It stood at 8.98% in March.