Mumbai: Inflation is likely to peak at around 13 per cent over the next two months before gradually moderating to around 8.5 to nine per cent by end-this fiscal, economists said. The country's economic growth too would moderate below the earlier-forecasted eight per cent to around the 7.5-7.8 per cent level in FY 09, they said.

"I expect inflation to peak at around 12.5-13 per cent in the next two months before beginning to decline. But double-digit inflation will continue atleast for the next four to five months," Yes Bank's Chief Economist, Shubhada Rao, told reporters here.

Global fuel prices present the most concern to policy-makers, the economists said. "Inflation will be contingent upon oil prices," Crisil's Director and Principal Economist, D K Joshi, said. "Prices of products such as aviation turbine fuel and naphtha have shot up 40 per cent year-on-year," Enam Securities Chief Economist, Sachidanand Shukla, said.

While inflation would peak at around 12.5-13 per cent, Joshi expected the yearly average inflation rate to be around the 8.5 to nine per cent mark. This figure, again, is much higher than the 5.5 per cent projected by some economists earlier. Rao, however, pegged the average at a much higher nine to 9.5 per cent.

Economic growth would be below the eight per cent mark, "maybe even below the 7.5 per cent mark", Bank of Baroda's Chief Economist, Dr Rupa Rege Nitsure, said. But other economists such as Joshi and Enam's Shukla felt that it would be in the 7.8 per cent range. "Growth will definitely slow down given the rate hikes, but I don't expect it to fall sharply. It will be around the 7.8 per cent mark," Shukla said.

Yes Bank's Rao said that even pessimists were forecasting a seven per cent growth. "Amidst the present global turbulence and domestic headwinds, seven per cent is still very healthy," she said.

Food prices are expected to ease in the next few months. Much would, however, depend upon the monsoon, the economists said, but with a good one forecast, they expect a healthy kharif crop which would help in pushing down food prices. On whether the Reserve Bank would further hike the repo rate and cash reserve ratio (CRR), most economists expect a 0.25-0.50 per cent hike in the repo but were divided over its timing.

A CRR hike would, however, depend upon prevailing liquidity conditions, they said. While some expected the RBI to hike rates in July, others felt that the RBI might do so later. However, all are agreed that inflation would continue to occupy centre-stage throughout this fiscal.

Source : PTI