Inflation to stay around 12.9% in June 2012: RBI survey

The Reserve Bank of India (RBI) is expected to continue with its anti-inflationary monetary policy standing as the urban households expects current rate of inflation to sustain in this financial year as well as in the first quarter of 2012-13. The RBI in its 'Inflation Expectations Survey of Households: June, 2011 said, “Urban households expect inflationary pressure to sustain through this fiscal and the first quarter of 2012-13 and feel there may not be any softening of food prices.

Whereas the RBI survey expects inflation to stay around 12.9% in June 2012, which is higher than the earlier estimate of 12.7% in March 2012, daily-wage workers and housewives expected higher inflation rate to continue, this raise in inflation would be mainly on account of increase in food prices. Whereas, the housewives surveyed said that they expects inflation to be around 13.1% by June 2012, daily wage workers said it would be around 13.4%. 

However, financial sector employees and self-employed responded of survey believed inflation to be around 12.1% and 13% respectively by the June 2012. 'Unlike in last round of the survey, the percentage of respondents expecting price rise have gone up for all product groups (viz., food, non food, households durables, housing and services),' the survey said.

However, the expectations on general price rise were mainly influenced by movements in food prices, the survey added.  The RBI survey found that households expect inflation to increase by 170 basis points in the next 1 year from the perceived rate of 11.2% in April to June 2011. Whereas, 94.8% respondents believe that the food prices will rise during July 2011-June 2012, 86.6% had a similar view regarding price rise of non-food items.

'From September 2010 round of the survey, household inflation expectations are higher than the official inflation rates. In the current round also, the same trend has been observed,' the RBI survey said. According to the survey, around 98.7% of respondents believe that the prices will increase. This expectation of increase in prices shows that more urban households are expecting increase in inflation. In last survey, around 96% of respondents believed that inflation will rise. 
RBI's Households Inflation Expectations Survey said  'For household durables and housing, more respondents are expecting price to increase as compared to the previous round... the same is expected to increase for the next one year.” On the RBI monetary policy standing, RBI survey said, '25% of the respondents felt that RBI is taking necessary action to control inflation...out of this, 51% felt that RBI's action has an impact on controlling inflation'.

Headline inflation, measured by Wholesale Price Index (WPI) has been hovering near by the double digit mark. For the month of June, inflation stood at 9.44% from 9.06% in May. The weekly food inflation measured by WPI reached 9.9% after short period of moderation. The lasted RBI survey is the 24th round of survey and it was conducted during the first quarter of 2011-12 and covered around 4,000 urban household across 12 cities for the July-September 2011 quarter and the July 2011-June 2012 period. The survey was done to find the inflation expectations of Indian urban households. Apex bank has been doing this survey on quarterly basis since 2005.