Mumbai, Oct 30 (IANS) The Reserve Bank of India (RBI) Tuesday revised upward its projection of inflation to 7.5 percent from its earlier estimate of 7 percent announced in July and said the situation could worsen in the third quarter of the current financial year.
"Inflation is expected to rise somewhat in the third quarter before beginning to ease in the fourth quarter," RBI Governor D. Subbarao said here while announcing the second quarter review of monetary policy for 2012-13.
Subbarao said the "baseline projection for headline wholesale price index (WPI) inflation for March 2013 is raised to 7.5 percent from 7 percent indicated in July".
The focus of RBI's monetary policy has been on taming inflation and the central bank kept key policy rates unchanged Tuesday.
The Wholesale Price Index-based inflation has remained sticky, at above 7.5 percent on a year-on-year basis, through the first half of the current financial year.
In September, it rose to a 10-month high of 7.81 per cent, from 7.55 per cent in August, owing to the increase in fuel prices and elevated price levels of non-food manufactured products.
"This is, in part, attributable to some suppressed inflation in the form of earlier under-pricing being corrected. However, even after adjusting for this, the momentum remains firm," the Governor said.
Consumer price inflation, as measured by the consumer price index (CPI), has remained elevated, reflecting the build-up of food price pressures.
CPI-based inflation, excluding food and fuel groups, ebbed slightly during June-September period from double digits earlier.
The RBI said that despite recent moderation, global commodity prices remain high. But geopolitical developments could further flare up prices and induce inflationary pressure.
"Domestic prices of administered petroleum products do not reflect the full pass-through of global commodity prices and under-recoveries persist. While corrections are welcome from the viewpoint of overall macro-economic stability, their second round effects on inflation will have to be guarded against," it said.