Inflation to hover around 6.5 pc mark: economists | india | Hindustan Times
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Inflation to hover around 6.5 pc mark: economists

india Updated: Feb 11, 2007 12:08 IST

Inflation is likely to hover around the 6.5 per cent mark over the next two months with liquidity also poised to get tighter, warned economists.

Demand-side pressures, now visible, alongwith existing supply-side pressures have contributed to fuelling inflation past the 6.5 per cent mark, they said here.

"The present inflation number is in line with our expectations and I expect it to hover around the 6.5 per cent mark for some more time," Standard Chartered chief economist (south Asia) Shuchita Mehta said.

The lagged effect of the RBI's monetary measures to curb inflation have not been felt so far, though there has been some tightening in liquidity, she said.

Normally, it takes about a year for the lagged effects to be felt, Crisil director and principal economist DK Joshi said, adding that rate hikes effected by the RBI a year ago "will show up now".

Terming the present inflation level "demand-fuelled", Joshi said the "demand side of inflation has only now started showing up with goods prices rising in the recent past".

Pointing out the hike in manufactured goods prices and attributing this to increased raw material and input costs, Joshi said, "Earlier such increase was absorbed by the manufacturers.

"Beyond a point manufacturers cannot absorb rising costs and when there is high demand - as is the case presently - they will pass on the added cost to the consumer."


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