Indian Household Inflation Expectation Remains Above 10%: RBI

Mumbai: Indian households expect consumer inflation to remain above 10 per cent over the next year, a survey by the Reserve Bank of India shows, in sharp contrast to the actual data which was nearly half that figure in December.

Households expected consumer price inflation at 10.3 per cent over the period from January to March this year, according to the survey conducted in December and published on Wednesday. It was 10.5 per cent in the September survey.

For the period from January to December this year, households expect inflation at 10.5 per cent, versus 10.8 per cent in the previous survey.

Indian households' expectation of a sticky and elevated level of inflation has been a source of concern for RBI Governor Raghuram Rajan, who has vowed to lower consumer inflation to 5 per cent by end-March 2017 and 4 per cent in the medium term.

An expectation of high inflation could potentially keep pressure on wages elevated, which, in turn, would feed into retail inflation and eventually might thwart the central bank's efforts to rein in prices.

Consumer price inflation edged up to 5.61 per cent in December from a year earlier.

The RBI kept its policy rate on hold at 6.75 per cent on Tuesday, opting to wait for more clarity on inflation development and the budget at the end of February to decide whether to cut interest rates further.

However, consumer confidence improved slightly, with 49.1 per cent of households expecting incomes to rise one year ahead, up from 47.1 per cent in the September survey. Expectations on employment also improved to 51.6 per cent one year ahead from 47.1 per cent in the previous survey.