RBI raises inflation estimate; Basu says high prices to stay

The Reserve Bank of India (RBI) today raised its projection for wholesale price index-based inflation to 7 per cent at the end of this financial year, from its earlier estimate of 5.5 per cent.  The Finance Ministry, in its mid-term analysis in December, had pegged the figure at 6per cent, but later revised it to 6.5 per cent.  This prompted Chief Economic Advisor Kaushik Basu to say the government might have to live with high inflation for alittle longer than expected.  “The battle against inflation, which we were hoping would come to an end by March-April, will probably continue for some more months,” Basu said. If  RBI projections are true, inflation at the end of this financial year would be somewhat moderate than 10.22 per cent witnessed in March 2010. However, despite the high base effect, inflation is not coming down drastically. This clearly shows that prices rose significantly this year.