Abheek Barua: Inflation - More shocks ahead?

The headline inflation rate for the week of July 5 released last Thursday printed at 11.91 per cent, a little over the 11.89 per cent of the previous week. The median forecast from financial market economists was 12.05 per cent. This prompted the finance minister to claim that inflation is stabilising.

The prognosis might turn out to be a trifle too optimistic. There are a number of risks lurking around the corner that threaten to take inflation up in the months ahead. Thus, I shall not be surprised if by September the inflation rate climbs well over 13 per cent. For one, the much-discussed "base effect" turns adverse post July and is likely to pull the inflation rate up. What it means is that inflation rates were exceptionally low in these months last year. Since inflation in India is measured year on year