The inflation, majored by wholesale price index, is projected to rise by 5.7 per cent in 2005-06 compared to the 6.4 per cent rise in 2004-05, CMIE said in its monthly economic review in Mumbai on Monday.
The average inflation for the first 12 weeks of 2005-06 works out to 5.2 per cent compared to 5.3 per cent in the same period last fiscal. The erratic progress of the South West monsoon would have an impact on agriculture production and may lead to rise in prices of primary articles, it said.
Inflation has also been influenced by prices in the international market, demand for commodities and level of competition in the industry, CMIE said adding, the supply of agricultural commodities is likely to be lower due to prospects of a dip in production.
However, this would not have a noticeable impact on prices and "we expect the government to continue to keep low barriers against imports to keep inflation in check", it said. In addition to the prospect of lower farm production, spiralling global crude oil prices are a cause for concern.
The average prices of crude oil (Dubai) increased from $25.8 per barrel in 2002-03 to $36.6 per barrel in 2004-05 and jumped to $47.9 per barrel in the first quarter of 2005-06, it said.
The overall increase in the index of fuel, power light and lubricants is projected to see a 10.2 per cent rise in 2005-06 over 10 per cent in last fiscal, it added.