Be afraid ! Inflation may rise to 17%

Global investment banker Barclays Capital has projected that inflation may surge to 17 percent by September on back of another round of hike in fuel prices in the same month.

"We believe WPI inflation will remain in double-digit territory until May 2009. We expect WPI inflation of 17 percent by September 2008," the report said.

For the week-ended June 28, wholesale prices-based inflation touched a new 13-year high of 11.89 percent much higher than the Reserve Bank's tolerance limit of 5.5 percent for the current fiscal.

According to the report, the government is likely to hike fuel prices between 10 and 20 percent again as early as September to limit fiscal risks.

Rise in the price of the Indian crude oil basket to USD 145-150 per barrel from the current USD 132 per barrel could be the trigger for another round of increase in fuel prices, it said.

The government last revised retail petroleum prices with effect from June 5, when petrol prices was increased by Rs 5 a litre, diesel by Rs 3 per litre and cooking gas by Rs 50 per cylinder.

This resulted in inflation touching a double-digit figure of 11.05 percent for the week ended June 7.

Last week, even Finance Minister P Chidambaram's adviser Shubhashis Gangopadhyay predicted that double digit inflation will continue throughout the year 2008 and could impact the economic growth negatively.