Inflation Rises 7.57% how will India be Impacted?

This is the highest rate since November 13, 2004 and was above an average  forecast of 7.38 percent in a Reuters poll of analysts. The rise is mainly due to higher food prices for example the price of Tea went up by 17% Don't believe the food shortage hype though.  The media is creating a food shortage frenzy that is similar to the oil crisis frenzy.  This story has no legs and will soon die down.

Other commodities with increases include light diesel and furnace oil went up by 2% and by 1% respectively. In the manufactured products category cast iron pipes jumped by 51%, pig iron by 8% and steel sheets by 2%.

The annual rate of inflation, based on wholesale price index has been rising despite fiscal and monetary measures taken by the government.  The RBI has increased the Cash Reserve Ration to temper liquidity and the government is banning exports on some commodities.

The inflation rate is high but it's not out of line with typical emerging countries.  If you compare it to China's inflation rate at 8.7% India is maintaining better control.  However, inflation has been increasing (Table 1) steadily throughout the last few decades so caution is needed. 

Our bet on wage inflation is that it's likely increase throughout the remainder of the year as India's knowledge worker's demand greater compensation to offset rising living costs. This will create inflationary pressures to non-food areas, especially in the service sector which has been battling the weakening dollar.