Inflation at 8.24%; RBI likely to act soon: Experts

Inflation for week ended May 24 is at 8.24% versus  8.1%. A CNBC-TV18 poll saw inflation for the week ended May 24 at 8.25%.

The WPI (Wholesale Price Index) for all commodities is up0.1% at 229.8 for May 24. The inflation for March 29 has been revised to 7.75% versus 7.41%. The WPI of the non-food articles is up 0.5% at 231.5 for week ended May 24. The imported edible oil WPI is up 6% for week ended May 24.

Finance Minister P Chidamabaram said he is willing to take more steps to tame inflation. The tax to GDP ratio will reach 13% in FY09. He said the high inflation is mostly due to the relentless oil price rise.

Rajiv Anand, Head Investments, IDFC MF expects inflation to go inch up to 9%-9.50% going forward. He feels the markets have pretty much priced in the inflation going to about somewhere between 9% to 9.50%. He thinks the major problem is clearly the supply. He said that one could track inflation assuming that commodities behave themselves over the next three-six months.

Anand expects the RBI to act in the next few weeks or probably in the next credit policy to manage inflationary expectations. He said that the RBI may consider various options like a Cash Reserve Ratio (CRR) hike or a Repo rate hike or increased issuances of Market Stabilisation Scheme (MSS) or appreciating the Rupee. He however believes it would be a combination of all four.

MBN Rao, CMD of  Canara Bank said that inflation definitely is a matter of concern for all of us. It has started picking up from December. But he believes that with all the measures the Government of India and RBI have taken, inflation will come under check. He said that there no doubt would be an immediate spurt because of the fuel price hike. However, that’s only going to be temporary, he added. He believes that once the price hike is absorbed and the dust settles down, inflation should also come down in the medium term. He expects a minimum growth rate of 8.5% in the current year for India.

Rao feels that the inflation is not a reflection of the Indian economy. Infact, it’s more of external factors like the crude prices and the international food prices. He said the domestic economy has been doing extremely well and will continue to do well.