Even as food inflation eased a tad to 17.81 per cent for the week ended February 27 from 17.87 per cent in the previous week, the overall wholesale price index (WPI) inflation is expected to commence its uptrend in the coming weeks as a direct impact of the hike in petrol and diesel prices, the across-the-board increase in excise duty and its cascading effect on the manufacturing sector and the broader economy.

As a consequence, although food prices are expected to soften further in the coming months in anticipation of a good rabi harvest and actual arrival of fresh crops, the general perception among economic analysts is that headline inflation may breach double digits by the end of the current fiscal owing to higher prices of fuel, manufactured goods and other non-food items.

Speaking to the media in Mumbai on the issue of high inflation, primarily driven by food prices, Reserve Bank of India Deputy Governor Subir Gokarn said: “Inflation is now broad-based and spreading to areas other than food, especially manufacturing, and is not just restricted to food inflation”. However, the positive aspect is that food prices are expected to moderate in the days ahead even as certain items may remain costly. “We are in the early part of the rabi harvest and there is a growing confidence that the harvest is reasonably good, although there will be pressure on specific commodities. Overall, we should see some moderation in food prices,” he said.

Double-digit inflation

As for double-digit headline inflation, it may happen but not for long. “Double-digit inflation could happen...numbers are very volatile. But it is a consequence of food prices shooting up...If double-digit inflation happens, it won't persist,” Mr. Gokarn said.

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