The Reserve Bank of India (RBI) has assured that that it would use all tools at its command to contain the rate of annual inflation to five per cent by March 2014. However, the central bank didn't explain how it would achieve the target.

High rate of inflation has remained a big concern for the central bank for a long time. CPI inflation is still in double digits at 10.4 per cent, while the older index for industrial workers is at more than 11 per cent.

Wholesale price index (WPI) inflation slipped to 5.96 per cent in March, but many economists are of the view that a revised figure could turn out to be higher finally.

Bringing rate of inflation further down will be an uphill task for the central bank, given a latent inflationary pressure due to the soaring minimum support prices of various grains and pulses ahead of the general elections.

Increase in global prices of various commodities, including oil, will also create inflationary pressures.

Falling key interest rates will also encourage people to save less and spend more. The RBI recently announced a cut of 25 basis points (bps) in the repo rate. The repo rate is now at 7.25 per cent, lowest level since May 2011.