Inflation to clock over 13% by Dec: RBI survey

Urban households expect inflationary pressure to sustain through 2011 and feel there may not be any softening of food prices, an RBI survey shows.

While year end 2011 household inflation is expected to be 13.1%, up from the perceived 11.8% in December 2010, daily-wage workers and housewives expected higher inflation rates to continue.

As per the 'Inflation Expectations Survey of Households : December 2010 (Round 22)' conducted by the apex bank, the rise will be mainly on account of movement in food prices.

"Households expect inflation to rise further by... 130 basis points during... Next year (13.1%) from the perceived current rate of 11.8%," it said.

While the housewives surveyed said they expect year-end 2011 inflation to be 13.2%, daily wage workers said it would be 13.5%.

On the other hand, financial sector employees and self-employed projected inflation to be 12.4% and 13%, respectively, by year-end.

"Households' expectations of general price rise were mainly influenced by movements in food prices," the survey said.

Overall inflation, as per the Wholesale Price Index (WPI) has been above 8% since February 2010. Food inflation also remained in double-digits for most of 2011, barring a few isolated weeks.

During the October-December period of 2010, the WPI hovered between 8.08% and 9.41%.

Besides, retail inflation for industrial workers, measured by the Consumer Price Index (CPI) stood at between 8.33% and 9.7% during the quarter.

"In the current survey round, household inflation expectations are higher than the official inflation rates. It can be seen that even though the official indicators are moving in the downward direction, expectations are showing an upward swing," the survey said.

RBI found that 98.6% of the respondents believe that prices will increase. This shows that more urban households have come to the view that inflation is on the upswing than during the previous survey when 96.5% respondents had given such a view.

"In case of one-year ahead price expectations, the percentage of respondents expecting food price increase has gone up. A similar trend is observed for non-food products as well," the survey said.

While 91.7% respondents said they expects food prices to rise during 2011, 83.5% had a similar opinion regarding price rise of non-food items.