New Delhi: Inflation, which crossed the 1 percent mark for the week ended October 10 after seven months, is likely to surge to 10 percent by March end driven by surging food prices, low base effect and rising manufacturing costs, industry body Assocham said.
However, the industry chamber wants the government to keep
soft monetary stance, adopted during the global financial
meltdown, unchanged as it feel that the resultant rise in
interest rates could hurt private investment.
It said, as the government has to borrow large amount of
money from the market to finance the high fiscal deficit,
estimated to be 6.8 percent of GDP this fiscal, the knee jerk
reaction on inflation could cause sharp rise in interest rate
scenario and crowding out of private investments, it added.
Assocham said that although there is a hope that with the
kharif crop coming to the market food prices will start
cooling off but the chamber believes the impact may not be
much significant to offset the increasing prices.
It is estimated that the significantly deficient (about
20 percent) monsoon, which has hit half of the country, could
impact kharif production by about 15-20 percent, it said.
The rise in crude oil prices and other commodities such
as copper, aluminium and manufacturing articles have started
moving up swiftly during the recent weeks, it added.
Meanwhile, the Prime Minister's economic advisory panel
and business information provider, Dun & Bradstreet (D&B) have
also said inflation may cross the 6 percent mark by March.
Bureau Report
First Published: Sunday, October 25, 2009, 10:53