Food inflation and commodity prices hold the key to inflation trajectory going forward, said Dwijendra Srivastava, Chief Investment Officer-Debt, Sundaram Mutual Fund in an interview to moneycontrol. Srivastava manages Rs 14,500 crore—roughly 50 percent of the AMC’s total assets-- across 11 fixed income funds, 4 capital protection funds, 22 fixed term plans and 9 hybrid funds. He expects consumer inflation to remain well within Reserve Bank of India’s target of 5.3 percent by March 2017, even if crude oil prices were to touch USD 60 per barrel because of tighter supply. However, Srivastava sees inflation crawling higher post March, because of factors like pay hikes for government employees and implementation of the Goods and Services Tax. The approved recommendations of the Seventh Pay Commission on pay and pension would put more disposable income in the hands of 4.7 million employees and 5.3 million pensioners, leading to increased demand for goods and services. Also, inflation tends to increase in the initial phase of GST as the tax rate on services rises because of the move to standardize tax rates for goods as well as services.
