Double-digit inflation to continue till December: D&B

Inflation is projected to remain in double digits till the end of this year as the fiscal measures initiated by the government are expected to yield results only by December, a latest report by Dun & Bradstreet says.

"Given the supply-driven nature of the current inflation, the RBI's measures are likely to have limited impact towards controlling inflation in the short run," leading business information provider Dun & Bradstreet India COO Kaushal Sampat said.

The fiscal measures initiated by the government to augment supply are expected to begin yielding results from December. As such, we expect inflation to continue to remain elevated and in double digits till December 2008," Sampat added.

High input costs and rising interest rates have impacted industrial growth, with IIP growth slowing down to 5.23 per cent in  first quarter of FY'09, against a growth of 10.28 per cent in the same period last year, the report stated.

However, with inflation continuing to be in double digits and the money supply growing well above target, RBI further tightened its monetary stance, increasing the CRR and repo rates.

"Recent increase in policy rates could lead to upward movement in banks' lending rates, thereby increasing pressure on corporate margins. Also, high interest rates would further dampen the demand in interest sensitive sectors. We may witness deferment in investment decisions by companies," Sampat said.

Industrial growth is, therefore, expected to be subdued in the months to come and average at around 6.8 per cent during FY'09, he added.