India’s inflation rate rose to 8.31% for February, above the 8% figure projected by analysts, according to The Times of India. The central bank is expected to announce a 0.25% hike in key rates during its mid-quarter review of monetary policy on March 17 to combat the rise.
What’s worrying about this spike is that it isn’t just in food. In fact, the price of certain foods actually fell on a year-over-year basis. Fuel and power prices were up 11.19%, which isn’t surprising. But the manufactured goods group index was up 4.49% year-over-year.
Indian economists lack consensus on the root cause of the non-food inflation spike. Economists at the local ICICI Bank believe that even if non-food inflation eases manufacturing inflation is expected to rise, according to MoneyControl.
At a press conference, Indian Finance Minister Pranab Mukherjee said that he expects inflation to drop to 7 or 7.5% by the end of the month.
Note the recent decline in food inflation at the end of February:
Photo: HDFC Weekly Review