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Drought likely to push up inflation to 4.3%

Inflation is forecast to go up to 4.3 per cent in the next 3 months, up from the present 3.4 per cent on account of high growth in money supply coupled with increase in prices of food and primary articles due to drought in some parts of the country.

"Based on the available formation, we forecast inflation rate (based on wholesale price index) for the next three months beginning September to be 4.37, 4.32 and 4.23 per cent respectively," the Institute of Economic Growth said in New Delhi in its latest report.

Prices are expected to rise on account of likely increase in the prices of primary and food articles followed by a hike in prices of petrol and diesel and abundant liquidity in the market.

However, increase in the industrial production may curtail the sharp increase in the prices to some extent, it said.

The Institute has forecast the consumer price index based inflation rate for the next three months as 3.78, 3.68 and 3.58 per cent respectively.

Increase in the prices of fuel, primary articles and manufactured products by 5.6, 2.4 and 2.4 per cent respectively has led to the surge in wholesale prices.

The prices of edible oil and iron and steel increased by 15.1 and 6.8 per cent respectively while the prices of sugar products and cement declined by 6.3 and 3.3 per cent respectively, it said.

Contrary to this trend, the inflation rate based on CPI (industrial workers) has shown a marginal decline from 4.1 per cent in June to 3.9 per cent in the month of July, it added.

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