WPI inflation seen at 8% on rising crude prices

Wholesale price inflation is likely to be around 8 per cent in March on account of rising global crude prices, much above the Government estimate of 7 per cent, research firm Dun & Bradstreet has said.

The research firm “expects the WPI inflation to be around 7.9 per cent-8.1 per cent during March’’.

Overall, the inflation rose marginally to 8.31 per cent in February 2011 from 8.23 per cent in the previous month. The Government expects it to fall to 7 per cent by March-end.

Food inflation has been declining for the past few weeks on account of a fall in the prices of vegetables and fruits. It fell to a single digit of 9.52 per cent during the week ended February 26, after a gap of nearly three months.

However, while international crude oil prices have softened recently, they are still hovering around $100 a barrel.

“Despite the moderation in food inflation in the past few weeks, upside risks to inflation have mounted, given the continuous surge in global crude oil prices and the uptick in international prices of food articles,” the report noted.

The easing of food inflation, however, may not prompt the Reserve Bank to halt monetary tightening as some essential commodities are still dearer and rising commodity and crude oil prices will have a bearing on the rate of price rise.

“The RBI is expected to continue with its current policy and hike the short-term lending and borrowing rates by 25 basis points each in the next quarterly review later this month,” according to an economist.

The central bank will conduct its mid-quarterly policy review on March 17. It has hiked the short-term rates seven times since March 2010 to contain the inflationary pressure.

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