India's wholesale price inflation (WPI) is seen speeding to double-digits by March led largely by non-food components, and a hike in local fuel prices could add to the pressure, analysts said.
Headline inflation in January accelerated to its fastest pace in more than a year, vaulting above the Reserve Bank's end-March inflation forecast, led by fuel and manufactured products.
"We expect core inflationary pressures to rise further because input costs have surged faster than output prices," Sonal Verma, economist at Nomura said in a recent note.
"Therefore, we believe that core inflation will continue to accelerate and will be the key driver of inflation in 2010 as against supply-side food price-led inflation in 2009."
Verma expects the inflation rate to move into double-digits by March and has forecast 150 basis-point hike in repo and reverse repo rates as well as a 75 basis point increase in the cash reserve ratio by March 2011.
Her concerns are echoed by Citigroup economists Rohini Malkani and Anushka Shah.