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If the prices continue at the long term trend levels we will see index levels of 245 in JFM 2010. That corresponds to the 2009 levels of about 228; inflation will be around 7.5% then. Will the RBI be pressured to raise rates?
Food price inflation has been around 15% already, and sugar prices have gone seriously up worldwide. Wheat, while decreasing worldwide, has held steady (despite a pretty good supply this year). And the dollar has stayed at the 48 levels, regardless of what people say is "liquidity" and "inflow". The RBI seems to be actively intervening - what else can explain the $5-6bn we add every week to the reserves. But in the face of rising inflation a weaker dollar will help since most commodities are marked to international prices. But again, will the RBI bite?
It's an inflexion point for the economy, in a number of ways.
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