INFLATION continues to haunt policymakers in the UPA government though the food price index fell to 16.3 per cent in the week to March 6.

Many people are not convinced that the double-digit inflation will go away soon as data show that the fuel index has firmed up to 12.68 per cent, following the February 26 decision to raise petrol and diesel prices.

“There is clear concern over inflation. We thought that double-digit inflation of the 1990s had vanished. We thought we had broken the back of inflation. But, it has come back to haunt us,” said C Rangarajan, chairman of the economic advisory council to the prime minister, on Thursday while speaking at a meeting of Skoch Consultancy. But, he did not expect the Reserve Bank of India to take a hasty decision on key rates. He said the monetary authority should wait and watch as rabi crop could dampen inflation.

Vijay Kelkar, former chairman of the finance commission, concurred with Rangarajan. “Inflation targeting is important to take the Indian economy one notch above. In the coming years, inflation targeting will be the anchor of our growth,” he said.

But, agriculture minister Sharad Pawar signalled that worst was over. “The situation of rising prices of sugar, potato and other essential commodities has improved. The situation is definitely changing and it is a good sign,” he said, inaugurating a conference on kharif campaign.

According to the data released by the commerce and industry ministry on Thursday, the rise in the fuel index was also due to light diesel oil price rising by five per cent, aviation turbine fuel by four per cent, bitumen by three per cent and furnace oil by two per cent.

Food inflation fell as prices of urad and arhar dal fell by six per cent, tea, fruits and vegetables by four per cent and gram, bajra and wheat by one per cent each.

Signs of food inflation spreading to manufacturing products and the fuel basket were apparent in the monthly data for last month. Experts had noted that while food prices had started to stabilise, trouble was brewing in the fuel and manufacturing sectors.

Kaushik Basu, chief economic adviser in the finance ministry, had said overall inflation was high, but not alarming. He expects inflation to drop in April and fall to below five per cent in the second half of the year.

A Goldman Sachs report has attributed the near double-digit inflation to “sequential increases in fuel and manufacturing components.” It noted that the two per cent increase in fuel prices was largely due to the increase in coal and oil prices.

“There are upside risks to our end-March target of 10 per cent year on year on the WPI, and our FY11 forecast of 6 per cent year on year, ” the report said.