The Wholesale Price Index (WPI) for February is expected to come very close to double digits at 9.75%, according to a median forecast of 11 economists surveyed by DNA.
The high estimate is “factoring in the fuel price increase in the last week of February on account of the budget, the impact of the increases in the excise duty and the customs duty on petroleum products,” Indranil Pan, chief economist, Kotak Mahindra Bank said.
“Plus we are factoring in some increases in the prices of manufacturing items.”
With food inflation already ruling high, fuel prices have also contributed to the rising overall prices this month. According to an average of the weekly WPI data released on Thursday, fuel group inflation rose to 10.19% in February from 7.18% a month earlier.
All the economists who participated in the poll expect the headline WPI to touch double digits next month.
“Hitting double-digit is just a matter of time. It will be 10%-plus in March-April, if not in February itself,” said Siddhartha Sanyal, economist, Edelweiss Capital.Inflation has come a long way up. At the beginning of this financial year, inflation was 1.31%. It slipped into negative zone in June due to high base year effect and since then it has climbed upward.
The Reserve Bank of India (RBI) had in its monetary policy review held in January estimated inflation of 8.5% for this fiscal year-end.
However, WPI crossed the estimate with 8.56% in January itself.
This pushes the case for the RBI further tightening policy rates. At the January policy review, the central bank had raised the cash reserve ratio by 75 basis points to 5.75%.
A Citigroup Global Markets report on macro-economy expects RBI to raise policy rates by a minimum of 125 basis points in 2010.
Indeed, with inflation set to touch double digits, many economists see the RBI hiking the repo rate and the reverse repo rate while announcing the April policy.
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