New Delhi: Global banking major CitiGroup has revised upwards its inflation forecast for India to 8.6 per cent average for 2011-12 from the earlier projection of 8 per cent 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 per cent by March 2012, far above the Reserve Bank's projection of 6 per cent.

"We maintain our view that prices will remain elevated due to imminent hikes of domestic fuel prices, upward revision to minimum support prices of agricultural crops and continued upward revisions to past data... we now expect headline inflation to average 8.6 per cent as against 8 per cent 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 per cent."

RBI had in its annual monetary policy projected headline inflation to average 9 per cent during the first half of the fiscal, before moderating to around 6 per cent by March 2012.

Headline inflation stood at 9.06 per cent in May this year. Besides, the inflation numbers for March was also revised upward to 9.68 per cent from the provisional 9.04 per cent.

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 USD 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 per cent 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.

 

(Agencies)