Inflation likely to remain sticky at 7% in 2012-13: RBI

Painting a grim picture of the price situation in coming months, the RBI on Monday said inflation will remain sticky at current level of around 7% in 2012-13 mainly due to high oil prices and increase in tax rates.

"Inflation is likely to remain sticky at about current level during the year with the probability of further significant moderation being small," the Reserve Bank said in the 'Macroeconomic and Monetary Developments in 2011-12' report released on the eve of annual credit policy.

The last fiscal was marked by strong inflationary pressures that began easing only in December.

"Going forward...the near-term inflation trajectory is subject to significant upside risks, in particular from high oil prices and unsustainable levels of suppressed inflation, the lagged pass-through impact of rupee depreciation, higher freight rates and taxes, sustained wage pressures, and the structural nature of protein-food inflation," RBI added.

The Wholesale Price Index (WPI) based inflation has moderated to 6.89 per cent in March 2012.

While there was a slight decline in overall inflation in March, food prices have increased marginally.

Terming the rising prices of food items as 'disturbing', Finance Minister Pranab Mukherjee said the government will take steps to clear the supply-side bottlenecks to ease the price situation.

Pointing out that the government would have been more comfortable with an inflation closer to 6.5 per cent, he said, "we shall have to be alert on it...Ofcourse the supply side constraint substantially effect food inflation. We will be addressing that".

The RBI further said that "major concern on the inflation front continues to be high fuel prices driven by the increase in international oil prices," the report added.