No respite as inflation touches 9.89 pc.

Inflation surged almost to double-digit mark at 9.89 per cent in February––considered to be the highest in the past 16 months—mounting pressure on the Reserve Bank of India (RBI) to tighten the monetary policy, thereby, making all borrowings more expensive.

What is worrisome is that the RBI’s projection of inflation touching 8.5 per cent by this fiscal-end was breached in January this year with inflation touching 8.56 per cent.

Finance Minister Pranab Mukherjee has admitted that the across-the-board hike in excise duty as well as duty hike on petroleum products would push up Wholesale Price Index (WPI)-based inflation by 0.41 per cent. Despite this trend, industry is apprehensive that the RBI will come under pressure to tighten its monetary policy in its forthcoming annual credit policy to rein in inflationary expectation.

The spiralling rise is primarily driven by increase in prices of certain food items such as sugar and duty hike on two auto fuels — petrol and diesel.

Data analysis shows that sugar prices went up by 55.47 per cent in February year-on-year while potatoes turned costlier by 30 per cent and pulses by 35.58 per cent.

Among fuel products, petrol prices rose by 11.73 per cent and diesel around 9 per cent. Further, the overall inflation was expected to rise further following the hike in excise duty on petrol and diesel.

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