In­dia's WPI di­verges from con­sumer in­fla­tion be­fore Modi bud­get

The Pak Banker - - MARKETS/SPORTS -

In­dia's whole­sale prices fell more than es­ti­mated in Jan­uary af­ter con­sumer in­fla­tion un­ex­pect­edly ac­cel­er­ated, com­pli­cat­ing the job of pol­icy mak­ers be­fore Prime Min­is­ter Naren­dra Modi's govern­ment presents its bud­get on Feb. 29.

Whole­sale prices fell 0.9 per­cent in Jan­uary from a year ear­lier, the Com­merce Min­istry said in a state­ment on Mon­day, com­pared with a 0.73 per­cent de­cline the pre­vi­ous month.

The me­dian of 30 es­ti­mates in a Bloomberg News sur­vey had pre­dicted a 0.13 per­cent de­crease. Con­sumer prices had in­creased at the fastest pace since Au­gust 2014.

Cen­tral bank Gov­er­nor Raghu­ram Ra­jan, who uses CPI as a bench­mark, kept in­ter­est rates un­changed this month and said he'd watch in­fla­tion and the bud­get be­fore adding to four rate cuts last year. While prof­li­gate spend­ing risks stok­ing in­fla­tion, govern­ment ad­vis­ers have pointed to de­clin­ing pro­ducer prices to seek lower bor­row­ing costs.

The 5.69 per­cent in­crease in CPI was led by a 43 per­cent surge in pulses, a key in­gre­di­ent in many In­dian recipes. Ra­jan is look­ing to hit a 5 per­cent con­sumer- price in­fla­tion tar­get for March 2017. He said on Satur­day that a cer­tain amount of de­pre­ci­a­tion in the ru­pee is needed un­til in­fla­tion is brought down.

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