But it isn’t just the monthly food bill that you need to worry about. Even your conveyance bill, which has seen six rounds of upward revision in seven months, could pose a problem as oil producers are predicting that crude oil prices will remain at three-digit levels.
"In our view, both products would likely see further upward adjustment in prices as global oil prices head toward $100/barrel. In particular, diesel prices remain well below cost recovery. While the government has resisted raising prices for that product for a number of months, we believe that a 4-5% price increase can be expected shortly," Deutsche Bank said in a research note. There was some comfort offered by Barclays Capital’s Sudakshina Unnikrishnan and Kerri Maddock who said that globally governments would step in to protect consumers.
In India the government is discussing ways to soften the impact, which could come through tax cuts or subsidy to oil firms. But oil is not the only commodity of concern. With economic recovery, prices of most commodities, have risen because of growing demand from China and India. Commodities posted a strong performance in 2010, with copper, tin, gold and cotton at all-time highs and silver and sugar at 30-year highs. The trend is likely to continue.
With prices across the three segments —food, industrial goods and oil — that determine inflation rising, the year-end inflation targets are being revised. The government had earlier estimated end-March inflation at 6% but now RBI has raised it to 7%. Apart from higher prices, a consumer may have to deal with higher interest rates. This means higher fixed deposits returns and higher outgo on home loans.