The next 12 months may altogether experience rate hike by as much as 125 basis points by the monetary regulator, Reserve Bank of India, said HSBC in a report.
"Still, more needs to be done: the wheels are running on hot on India's economy," HSBC Economist Frederic Neumann said. The sudden hike in policy rates by the apex bank almost a month ahead of the stipulated time has taken both banks and markets by surprise.
According to HSBC, the fuel price rise would lead to increase in WPI inflation even more in the coming months and the effects would also be visible in the upcoming months.
"As a result, there is a risk that inflation expectations may become unhinged," it said in the note.
The government said that the price rise in fuel would lead to addition of 1percentage points in the WPI inflation. The inflation reached 10.16% as reported by the statisatics revealed by May.