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Notwithstanding a good monsoon and bumper crop, the man on the street believes that prices of food products will increase over the next three months to a year.
This was revealed in a survey conducted by the Reserve Bank of India to gauge inflation expectations. The survey, among other things, is an important feedback that the RBI takes into account while framing its monetary policy.
The RBI defines anchoring inflationary expectations as one of its key functions. Therefore, it can be interpreted that the expectations of people that prices will only go up might put the RBI ill at ease when it meets to decide the monetary policy today.
About three-fourth of the 4,765 people, who responded to the RBI survey across 16 cities, felt that prices will increase across categories of products at a faster pace over the next three months and a year.
A majority of the respondents believe that food prices will increase faster than non-food product prices. A large number of themalso believe that house prices are headed north in the foreseeable future.
While people expect inflation to rise, an overwhelming 77 per cent people think that inflation will rise by double digits in the next three months. About 68 per cent felt that their wages would increase in the next one year.
Sadly for the RBI, only a third of the respondents were aware that the central bank plays a key role in controlling inflation.
> satyanarayan.iyer@thehindu.co.in
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