Global banking major CitiGroup has revised upwards its inflation forecast for India to 8.6% average for 2011-12 from the earlier projection of 8% on account of sustained price pressure and upward revision of past data.
It also said that headline inflation in the country is likely to be 8% by March 2012, far above the Reserve Bank's projection of 6%.
"We maintain our view that prices will remain elevated due to imminent hikes to domestic fuel prices, upward revision to minimum support prices of agri crops and continued upward revisions to past data... We now expect headline inflation to average 8.6% as against 8% expected earlier," Citi Investment Research & Analysis said.
In its latest issue of 'India Macro Flash', Citi further said inflation in March 2012 is "likely to be at 8%."
RBI had in its annual monetary policy projected headline inflation to average 9% during the first half of the fiscal, before moderating to around 6% by March 2012.
Headline inflation stood at 9.06% in May this year. Besides, the inflation numbers for March was also revised upward to 9.68% from the provisional 9.04%.
In its mid-quarterly review on June 16, RBI had also raised concern about rising core (non-food) inflation and said that the pressure from high global crude prices are yet to reflect in the inflation numbers.
While the hike over Rs 5 per litre on retail prices of petrol made by oil marketing companies (OMCs) have reflected in May inflation numbers, the long-expected price hike on diesel and LPG is yet to happen.
Once the diesel and LPG prices are increased inflation would go up further, according to experts.
OMCs have been talking of increasing pressure due to high international crude prices. Crude is trading around $100 per barrel in global markets on account of conflict in Middle East and North Africa.
Besides, the government had earlier in June raised the minimum support prices of paddy, pulses and cotton, among other crops.
After a period of moderation, food inflation had again breached the 9% mark in the last week of May. The hike in MSP is likely to affect the wholesale prices also.
In its mid-quarterly review, the apex bank had said that inflation persists at uncomfortable levels and it will continue with its tight monetary policy as inflation is spreading to the non-food segment also.
RBI has already hiked its key-policy rates 10 times since March 2010 to curb demand and tame inflation. Headline inflation has been above 8% since Jan 2010.
