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The inflationary pressures on the domestic front are likely to be exacerbated by the higher levels of global commodity prices and also the easy money policy being followed in several industrial nations trying to jump-start their own economies. The International Monetary Fund forecast indicates the likely continuance of high consumer price inflation for emerging and developing economies in 2011 due to continued robust demand and a sluggish supply response to tightening market conditions. The IMF has also upped its baseline projection for petroleum prices from US $79/bbl in WEO October 2010 to US $ 90/bbl in the January update of the WEO. Non-oil commodity prices are forecast to increase by 11 per cent in 2011. The update also indicated that near-term risks were now on the upside for most commodity classes and for some emerging economies that had grown rapidly there was danger of overheating on account of closing of output gaps.
(Source: Economic Survey 2010-11)
