SOBERING NEWS! INFLATION ISN’T COMING DOWN ANYTIME SOON
NEW DELHI: RBI had a strong message for everybody in its mid-quarter monetary policy review: Brace yourself for a spell of high inflation, at least in the near-term.
High inflation also means that RBI will hesitate to cut interest rates, a step needed to boost eco nomic growth.
“Wholesale price inflation which had eased in the first quarter (April-june) of 2013 14, has started rising again as the pass-through of fuel price increases has been compounded by the sharp depreciation of the rupee and rising international commodity prices,” RBI said.
“The current assessment is that in the absence of an appropriate policy response, WPI inflation will be higher than initially projected over the rest of the year,” it said
Skyrocketing onion and veg etable prices and costlier sta ples such as rice pushed India’s wholesale inflation to 6.10% in August, adding to an array of problems for the government battling to the steer the country out of a web of economic mess
The RBI has warned that the price curve is unlikely to turn downwards anytime soon
The government faces a potent mix of high inflation, a falling currency and poor economic growth at the worst possible time — key state elections are just months away, and national polls less than a year distant.