These are the findings of a quick survey carried out by the PHD Chamber for units located in Haryana, Punjab, Rajasthan, Madhya Pradesh, Uttar Pradesh and Delhi.
The survey revealed that inflationary expectations in the economy are high, not only on account of global economic imbalances but also because of systematic disturbances in the domestic economy.
Indeed, with the world crude oil prices soaring to a high of $135 per barrel, almost all the respondents expect a further rise in petroleum prices. The present policy of cross subsidisation, as per the survey, is unsustainable and petrol prices would have to rise in response to the mismatch in demand.
Besides, with the election season just round the corner, a majority of the corporate (around 90 per cent) felt that the government would undertake people centric programs which would lead to an increase in public expenditure. This would adversely affect the government finances, enhance government borrowing and consequently impact prices.
The possibility of a further rise in international commodity prices cannot be ruled out, according to industry.
Opinion is, however, divided about the impact of the implementation of the Sixth Pay Commission on prices. Around 50 per cent felt that the implementation will entail a substantial cost to the exchequer and further fuel inflation in the country.
Industry also cites past experience to show that there would be some impact on prices, though with a lag effect, once the commission report is implemented.
However some units feel that there are other pressing factors which would rigger inflation in the short run. These include increased inflow of FDI, portfolio investment and remittances.
This would necessitate RBI to sterilise the influx of foreign exchange with matching induction of rupees in the market thereby exerting inflationary pressures on the economy, units feel.
Despite this, industry is hopeful that the steps taken by the government would succeed in bringing down inflation from the current level. In fact, 63 per cent of the respondents felt that monetary and fiscal measures initiated by the government would eventually help to bring down the inflation.
