In­dia re­tail in­fla­tion picks up but re­mains be­low RBI target

Gulf Times Business - - BUSINESS -

In­dia’s re­tail in­fla­tion rose marginally in Septem­ber, nudged up by food and fuel prices, but short of the cen­tral bank’s 4% medium-term target, strength­en­ing views it could tighten mon­e­tary pol­icy in De­cem­ber fol­low­ing un­changed rates last week.

The mon­e­tary pol­icy com­mit­tee (MPC) of the Re­serve Bank of In­dia left the repo rate at 6.50% while re­it­er­at­ing its target of keep­ing con­sumer in­fla­tion at 4% in the medium term on a “durable ba­sis”.”

In Septem­ber, con­sumer prices rose 3.77% from a year ear­lier, com­pared with a 3.69% in­crease in Au­gust, the Statis­tics Min­istry said yes­ter­day.

For Septem­ber, the me­dian fore­cast of econ­o­mists polled by Reuters was 4%, with es­ti­mates rang­ing from 3.60% to 4.70%.

CPI in­fla­tion has started inch­ing up on the back of ris­ing prices of food and other goods and ser­vices, said Rupa Rege Nit­sure, chief econ­o­mist at L&T Fi­nance Hold­ings.

“Given the mas­sive de­pre­ci­a­tion of the ru­pee and el­e­vated crude oil prices, RBI will have to re­sort to pol­icy rate sig­nals sooner than later.”

Slower in­fla­tion in food prices, which make up nearly half of In­dia’s con­sumer price in­dex (CPI), has so far can­celled out rises in im­ported goods fol­low­ing the weak­en­ing ru­pee.

Food in­fla­tion rose to 0.51% from a year ear­lier, against 0.29% in Au­gust.

Core in­fla­tion, which ex­cludes volatile food and fuel sec­tors, was seen at 5.8%, down from around 6% in Au­gust, ac­cord­ing to an­a­lysts.

The RBI has pro­jected in­fla­tion of 4.8% by June 2019, slightly lower than its Au­gust fore­cast of 5%.

It has raised its pol­icy rate 50 ba­sis points since June, and is widely ex­pected to raise rates by at least 25 ba­sis points more this year.

The next pol­icy re­view is due on De­cem­ber 5.

Prime Min­is­ter Naren­dra Modi, eye­ing a sec­ond term in gen­eral elec­tions early next year, wor­ries that ris­ing re­tail petrol and diesel prices and a weak­en­ing cur­rency could un­der­cut his ef­forts to boost eco­nomic growth.

Na­tion­wide protests prompted the govern­ment last week to cut taxes on petrol and diesel prices, which could hit fed­eral spend­ing on in­fras­truc­ture.

Re­tail petrol prices have gone up 17.7% in the cap­i­tal, New Delhi, and diesel prices are up 24.99% this year, dent­ing de­mand for con­sumer durables and pas­sen­ger ve­hi­cle sales.

An­a­lysts said re­cent rates hikes and a weak­en­ing ru­pee, which has lost about 13% this year against the dollar, could hurt growth prospects in the sec­ond half of the fis­cal year end­ing in March 2019. The In­ter­na­tional Mon­e­tary Fund fore­casts In­dia’s econ­omy could grow 7.3% in the fis­cal year end­ing in March 2019, ver­sus 6.7% in the last.

A woman pushes a shop­ping trol­ley at a su­per­mar­ket in Ahmed­abad. In­dia’s re­tail in­fla­tion rose marginally in Septem­ber, nudged up by food and fuel prices.

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