Households expect inflation at 11.9% by June: RBI survey

Although the Government expects inflation to moderate to about 5.5 per cent by March 2010, a survey by the Reserve Bank has found that households expect it to rise to almost 12 per cent by next June.

They also see inflation remain in double digits for the foreseeable future. Wholesale Price Inflation for September stood at 8.62 per cent, the second consecutive month when it had been in single digit.

According to the survey issued in the latest bulletin by the apex bank, households believe that prices of food, housing and services are going to be up and fuel the rise in overall inflation.
    
The RBI survey is based on the findings as on June and takes into account the expectations of households for a period of one year. It covered major cities across the country, including the four main metros.
    
"The movement of the inflation expectations shows that the future inflation expectations are usually higher than the current inflation. In the current round of the survey (i.E., June 2010), the average rate of inflation expectations for... one year ahead (is) 11.9 per cent...," it said.
    
This is higher than the figure of 11 per cent measured in the last survey by RBI during the previous survey in the quarter ended March.
    
"Households' expectations of general price rise is mainly influenced by movements in foodgrains� prices. High price-rise is expected in food, housing prices and cost of service," the survey said.
    
The survey also found that more than 90 per cent households expect the inflation to remain in double digit both in the short-term and long-term.
    
"Around 92 and 94 per cent respondents expect that it would remain in this band (double digit) for short term and long-term, respectively," it said.
    
However, for the overall product group-wise, the percentage of respondents who expect food prices to soar has increased from 89.9 per cent in the March quarter to 91.7 per cent in the survey under review.
    
For non-food products, however, there has been a marginal drop from 83.6 per cent of respondents who felt prices will rise in the March survey to 83.2 in June.

RBI said, "For the other product groups, namely, household durables, housing prices and cost of services, it is observed that the expectations of price rise for July-September 2010 quarter and for the full year July 2010-June 2011 is on the higher side as compared to previous round of the survey."
    
The RBI survey comes at a time when inflationary pressure has turned into a cause of concern. Food inflation has been rising steadily and clocked 16.7 per cent for the week ended October 2.
    
The government hopes to bring down the overall inflation to around 5.5 per cent by March 2011. Earlier Prime Minister Manmohan Singh had also exuded optimism that inflation would fall to 6 per cent by end of December.