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The annual inflation rate of India is already near the 9% mark, close to a 13 year high. A rate of 9 percent would be the highest inflation in India since 1995. Economist suggest that since price pressures are largely beyond its control, the central bank will maintain a measured response to fight inflation by managing cash levels in the banking system rather than raising interest rates, which could impact growth.
Inflation has affected fuel and food prices considerably. Now, with the world oil price at a record high, the government is debating as to whether it should raise the pump prices again or not. Few economists however see inflation easing towards 6 percent in the second half of the fiscal year after September. Economists suggest that government price controls and additional subsidies will stoke demand, when fiscal policy has already been loosened for state and national polls over the next 12 months.
