Inflation for the week ended May 3 is at 7.83% versus 7.61%. A CNBC-TV18 Poll had seen it at 7.59%. The inflation for the week ended March 8 has been revised to 7.78% versus 5.92% (provisional number).

The food articles Index is up 0.5%; the fuel and power Index is up 0.8%, while the manufactured products Index is up 0.3%.

Abheek Baruah, Chief Economist at HDFC Bank thinks even the figure of 8% could be around the corner for the economy because the present inflation level has been higher than the consensus expectation.

He blames some categories like iron and steel, where the traction in prices is so strong that it completely donminates the inflation portfolio.

He doesn't see much hope in the conventional monetary policy to contain inflation. He said, "I would personally think that trying to get the currency to appreciate or at least prevent it from depreciating very sharply is clearly one option, because as far as commodity prices are concerned, there is a one-to-one correspondence between the exchange rate and the landed cost."

Indranil Pan, Chief Economist at Kotak Mahindra Bank said it was more of the food prices that went up and that would make it very difficult for monetary policy to bring down inflation.

He explains, "A significant portion of the decline in the prices globally could have been eroded out by the depreciation of the currency. Further, the fiscal measures would limit the upward rise in the prices. It is very difficult to see those prices coming down because again the deprecation effect would take away the impact of the excise cuts and the import duty cuts. So it is very difficult to see inflation actually softening in the very near future."

Ajay Mahajan, Group President of Financial Market & Institutional Investment at Yes Bank thinks an 8% figure is also possible, but it won't come immediately. "I think it will keep drifting and possibly cross the 8% mark in the next month," he said.

He expects markets to read bearishly into these numbers and the bullishness that came with the credit policy will fizzle out as readings continue to be higher and the market’s concern on inflation will be quite high. In this case he doesn't rule out a further CRR hike by the Reserve Bank of India (RBI) through the rest of the year with a possibility of a 25 bps minimum and even a 50 bps hike.

"The policy action may not be to raise policy rates as in the repo rate or the reverse repo rate, but there is a good chance that there could be repeat CRR hikes through the rest of the year as long as liquidity seems to be ample or driving inflation to some extent," he explained.

But Baruah thinks a CRR hike at this stage would be like barking up the wrong tree. "The sequence of CRR increases has led to us slowly slipping into a liquidity deficit, which constraints our ability to intervene in the currency market. I don’t think it really takes a complex econometric to figure out that is a situation where global commodity prices are rising. If your exchange rate appreciates, you at least add to the incipient price pressure. I think it is a fairly obvious route, I think we will have to look at the impact of the exchange rate a little more closely and perhaps stay off the monetary levers. Monetary policy I don’t think can help in this kind of inflation."

Pan has a different reading on the whole situation. "I have seen the story myself, but what they are planning to do is basically remove the restrictions from the infrastructure companies because they face a huge problem of raising long-term resources from the domestic market. That is the only area possibly where the relaxation can come. The second thing is that even if the relaxation comes on a slightly broader sense, it is very difficult to see that liquidity will immediately come in through the ECB routes given the credit tightening conditions in the global markets and the general risk averseness that could be there for the emerging markets on an immediate basis," he said. 

Sucheta Mehta, Economist at Standard Chartered Bank is one more person who believes inflation is headed towards 8% in the coming weeks to months. "It will remain above RBI's tolerance band for few months at least till the end of December after which it will begin to fall quite sharply and that’s largely because the base becomes very supportive," she says.

IV Subramanium, Director of Quantum AMC said, "Looking back a year ago we did expect higher inflation numbers in India, given the way prices were moving up and the supply constraints we had. We modeled it into our valuations assuming that the inflation numbers will be high and thereby there could be pressure on interest rates etc."

Mehta said, "We believe the RBI would be keeping liquidity under control and hence more CRR hikes are likely."

She concedes that policy rates may not go up for concerns linked to growth; recent industrial production have been on the weaker side, concerns on consumption slowing down, or is already beginning to slowdown. So policy rates might not move, but we may see more active liquidity management as and when liquidity comes back into the system.