After peaking at over 16% in January 2010, the annual rate of consumer price inflation moderated to 9.8% in October in response to tighter monetary policy and slower food price inflation. Consumer price inflation will decelerate in 2011, to an average of 6.8%, from an estimated 11.9% in 2010. In 2012-15 consumer prices will rise by 5-6% a year, assuming the absence of shocks such as a sharp rise in commodity prices or a failure of the monsoon in any given year. Another factor that could increase inflationary pressures is the deregulation of fuel prices. In June the government decided to end state control of petrol and diesel prices in an effort to bolster the public finances. The relaxation of price controls is a crucial step towards reducing losses at India's public-sector oil companies and containing the government's rising contingent liabilities. Our benign outlook for global oil prices suggests that the government will be able to eliminate fuel subsidies entirely during the forecast period, but a surge in petroleum prices would quickly feed through to domestic fuel costs. It is also possible that the government could reimpose prices controls in the event of another oil price shock.