India's inflation is likely to touch 8 per cent by the end of this fiscal, with an increasing risk that it may even reach double digits due to soaring food prices.
Saying that "India has encountered the threat of inflation much earlier than other countries," Religare Capital Markets Economist and Vice President Jay Shankar added that "our baseline WPI inflation number remains at 8 per cent, but we do not rule out a double-digit print".
The wholesale price-based inflation (WPI) spiked to 4.78 per cent in November from 1.34 per cent in October. The index of food articles, though, dropped by a moderate 1.30 per cent for the week ended December 12 from 19.95 per cent a week ago even though rates of essential items like potatoes and pulses remained too high for comfort.
"Rising inflation levels, remains a policy challenge and inflationary pressures are likely to result in monetary tightening by the Reserve Bank of India," Shankar added.
Meanwhile, in its October policy review, the Reserve Bank raised its inflation projection to 6.5 per cent with an upward bias from 5 per cent at the end of fiscal 2009-10.
Giving details, Shankar said, the consumer price index (CPI) is already at 12 per cent, while food inflation has been treading in double digits since early July.
According to a research report by Religare Hichens Harrison, India's CPI numbers are way ahead of Brazil, Russia, India and China (BRIC) and the South Asian countries.
While India's CPI is at 11.7 per cent, Brazil's is at 4.3 per cent, Russia (10.7 per cent), China (-0.8 per cent), Indonesia (2.8 per cent), Thailand (-1 per cent) and South Korea (2.2 per cent), the report added.
In a separate report, research firm Dun and Bradstreet had said WPI inflation would average around 6.40-6.60 per cent for the month of December and may touch 8 per cent by the end of the current financial year.
The main reasons behind the rise in inflation rates would be the significant price rise of primary food articles, besides, with the revival of global economy, the demand for crude oil would increase, which in turn would lead to a major rise in international oil prices, Dun and Bradstreet said.
"In view of rising prices of food articles and manufactured products and the expected increase in the fuel group inflation in the ensuing months, D&B has revised its inflation forecast upwards to more than 7.5 per cent by the end-March FY10 against the initial estimate of 6 per cent," Dun and Bradstreet had said.
Prices of primary food articles are likely to be a key concern in the near future and the rise in international oil prices, in turn, is expected to exert upward pressure on the domestic prices of minerals oil.