Inflation could rise to 6 per cent by March: RBI

India's annual inflation rate based on the wholesale prices could go up to 6 per cent by March, above the Reserve Bank of India's earlier forecast of around 5 per cent, RBI deputy governor K C Chakrabarty said yesterday in New Delhi.

"We have always said by March it should be 5 per cent; it may become 6 per cent," Chakrabarty told reporters on the sidelines of a conference on financial inclusion. In its July review, RBI had forecast the wholesale price index to be around 5 per cent by March 2010.

A surge in food prices unexpectedly pushed the annual change in the wholesale price index into positive in early September, after staying in the negative zone for three months.

The food articles sub-index rose an annual 15.4 per cent, up from the previous week's 14.8 per cent rise, as a poor monsoon hit nearly half of India's districts, hurting kharif crops and prompting the government to take steps to raise supplies.

Chakrabarty said the increase in prices at which the government buys food grains from farmers was also responsible for the acceleration in food inflation. "If we increase the procurement prices every year by 10 per cent or more, we cannot say food inflation will be less than 10 per cent," he said.

"This is also partially policy oriented ...we want to give more money in the hands of farmers," he said.

He agreed that it would be a challenge for RBI to choose between promoting growth and stemming inflation. While economists feel that higher inflation could put pressure on the central bank to hasten the tightening of its monetary policy, RBI officials have been saying that it may be too early to withdraw the incentives.

Another RBI deputy governor, Shyamala Gopinath, said in New York earlier that it was too soon for the central bank to unwind its accommodative monetary policy.