India’s inflation ‘inches up’ marginally to 5.77% in June

NEW DELHI, July 12, (AFP): India’s consumer price inflation notched up marginally to 5.77 percent in June from a year earlier, official data showed Tuesday, with hopes dimming of a possible slash in interest rates.

The acceleration from May’s 5.76 percent and 5.4 percent in April was mainly driven by higher food prices, economists said, adding the rate was uncomfortably higher than the central bank’s target.

Outgoing Reserve Bank of India (RBI) governor Raghuram Rajan has set a medium-term goal of controlling inflation at five percent by March 2017.

“Indian consumer price inflation held steady in June, but ... the scope for further monetary loosening still looks very limited,” said Shilan Shah, an economist at London-based Capital Economics.

Rajan will be chairing his last monetary policy review meeting in Mumbai on August 9 before he steps down as governor.

The popular RBI chief shocked markets last month when he announced that he would be returning to academia after his first term wraps up in September.

Rajan, who famously predicted the 2008 global financial crisis, has been widely credited with bringing stability to India’s economy since taking over the reins of the RBI in September 2013.

He has brought inflation down from double-digit levels to 5.8 percent currently, and last month urged the central bank and India’s government to focus on keeping it under control.

Rajan has made controlling inflation a priority during his tenure and clashed with Prime Minister Narendra Modi’s government over how quickly the RBI should cut rates — a reason he seemed to hint factored into his decision to leave.

Rajan’s successor is widely expected to be announced before July 18, with Indian media tipping Arvind Panagariya, a top government policy maker, as the next possible governor.