The RBI has forecast an inflation rate of 6.5 per cent by March 2013. But according to its latest Inflation Expectations Survey of Households, most Indians think the inflation rate may well be 12.5 per cent by then.

Around 90 per cent of the households based their responses on expected changes in food prices to arrive at general price expectations.

Not just that: The percentage expecting a rise in inflation now is higher than in the previous round.

Data since 2005 shows that the households' perceived inflation rate often falls between the wholesale price index (WPI) and consumer price index for industrial workers (CPI-IW) inflation rates.

However, from September, 2010 onwards, the perceived rate has been higher than both the official rates.

The Wholesale Price Index for March rose 6.9 per cent year on year, while the new Consumer Price Index increased by 9.9 per cent.

In its monetary policy statement for 2011-12, the RBI had projected that inflation would gradually moderate to six per cent by end-March, 2012.

Indian households, on the other hand, thought inflation would go up to 12.7 per cent.

The RBI's view proved more accurate, with WPI inflation falling to 6.9 per cent in March.

Daily-wage workers and housewives, probably, the categories most affected by price rise, today expect higher inflation rates compared to other categories.

Around 99.2 per cent of households have projected that price rise will occur in food items, while 97.5 per cent expect the cost of non-food products to go up, 96.3 per cent see a rise in housing prices, 95.8 per cent in the cost of services and 90 per cent in consumer durables rates.

Inflation expectations, however, seem to be moderating of late. In the previous two rounds of survey, households forecast inflation rates of 12.9 and 13.3 per cent one year later. Expectations have now diminished to 12.5 per cent.

This round of the survey was conducted between February 27 and March 9, 2012.

> Arvind.jayaram@thehindu.co.in

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