Is inflation entrenched? Experts answer

The wholesale price index (WPI) for the year rose to 8.98% in March as against 8.31% in February on higher fuel and manufactured product prices. There is no taking away from the entrenched nature of inflation in India. It is no longer a food inflation triggered by monsoon vagaries or a fuel inflation driven by the Middle Eastern issues. It is clearly core inflation that is surging.

For two months in a row, February and March, core manufacturing non-food inflation is up 1.4% month-on-month. This is dire. Textiles as a group saw prices rise by 2.5% in February over January and by a further 4.6% in March over February. Isn't this demand led inflation? Likewise, rubber and plastics were up 2% in February and now again 1.1% in March, all month-on-month numbers. Chemicals were up 1.7% in February and again 1.6% in March; metals up 1.7% in February and again 1.5% in March. It is really tough now to run away from the conclusion that inflation has gotten entrenched and so have inflationary expectations. In fact the RBI household survey itself indicates that inflation could jump to 13% by end of the year. So, what is the way ahead? What should the Reserve Bank be doing and what can be the repercussions on both inflation and growth in particular? In an interview with CNBC-TV18