Around 77 per cent of the respondents apprehended double-digit inflation in the three-month period after the survey, compared to 65 per cent in the quarter ended June 2013.

Most households in India expect inflation to move higher, according to the latest Inflation Expectations Survey of Households conducted by the RBI.

Conducted in the third quarter of 2013 (July-September), the latest survey of 4,765 urban households in 16 cities found that families expected prices to climb from 11.8 per cent year-on-year in the quarter ended September 2013 to 12.8 per cent in the October-December quarter.

Towards the end of September 2013, they expected inflation for the next 12 months to be at 13.5 per cent.

This was the sixteenth consecutive double-digit average inflation expectation since December 2009. Around 77 per cent of the respondents apprehended double-digit inflation in the three-month period after the survey, compared to 65 per cent in the quarter ended June 2013. And 80 per cent forecast double digit inflation over one year, up from 73 per cent in the second quarter of 2013.

According to the latest data, wholesale price index (WPI) inflation shot up to an eight-month high of 7 per cent year-on-year in October, above the RBI’s “comfort zone” of 5 per cent, for the fourth consecutive month.

Consumer price inflation, on the other hand, touched 10.09 per cent in October due to costlier food and a weak rupee that drove up import costs.

The RBI responded to the trend by raising the repo rate to 7.75 per cent in October from 7.50 per cent in September and 7.25 per cent in August.

But less than a third of the respondents to the survey were aware of the RBI’s steps to combat inflation, whereas over half of them had knowledge of anti-inflation measures in the quarter ended June 2013.

And of the respondents, less than a fourth believed the policies would quell inflation.

Just 27.8 per cent of the financial sector employees taking part in the survey said they felt any impact on inflation as a result of the RBI moves, whereas this view was only shared by 12.4 per cent of the workers that participated.

City-wise

Nevertheless, the survey indicates that inflation expectations have eased in many major cities across the country. The expectation was highest in Guwahati, with respondents fearing a 13 per cent price rise in the survey conducted in July-September 2013, compared with 15.4 per cent in the previous quarterly survey. In Mumbai, respondents projected 12.3 per cent inflation (down from 14.9 per cent) and in Bangalore, the prediction was 9.2 per cent inflation (down from 14.2 per cent).

In Delhi, on the other hand, the survey responses suggested a rise in inflation to 12.2 per cent in the December quarter, compared to a 11.6 per cent estimate for the three months ended September.

arvind.jayaram@thehindu.co.in

(This article was published on December 8, 2013)
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