Inflation seen at 10 pct in March: HSBC

India's WPI index is expected to peak at 10 per cent in March 2010.

India’s WPI index is expected to peak at 10 per cent in March 2010,from an earlier forecast of 8 per cent for the period,HSBC said in a note on Thursday.

The Reserve Bank of India in its October policy review had projected WPI inflation for end-March at 6.5 per cent with an upward bias from 5 per cent earlier.

India’s wholesale price index rose 7.31 per cent in December from a year earlier,strengthening the case for the central bank to tighten policy later this month to temper inflation expectations.

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“For the WPI rate to hit double-digits by March would require seasonally adjusted month-on-month increases of 0.7 per cent a month,something which looks entirely possible as the impact of higher commodity price inflation feeds through,” Robert Prior-Wandesforde,senior Asian economist at HSBC wrote.

The note also said it would be a major surprise not to see some rate action at the January 29 policy meeting.

“A still fairly dovish-sounding RBI,however,means this is more likely to involve the Cash Reserve Ratio (where we expect a 50 basis points move) rather than the repo or reverse repo rate,” the note said.

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