India says inflation may be 'under pressure' until December
India's inflation may be “under pressure” until December, the finance ministry said, reiterating the central bank's view before next week's monetary policy announcement.
“Non-food manufactured product inflation could be high in the next six months due to cost pressures,” the ministry said in a report in New Delhi today. “It's expected that headline inflation will be under pressure till December 2011.”
Reserve Bank of India Governor Duvvuri Subbarao, who has raised interest rates 12 times since mid-March 2010, will announce the next policy decision on Oct. 25. Emerging-market nations from Brazil to Russia have reduced borrowing costs to support growth as a struggling U.S. recovery and deepening debt crisis in Europe threaten the global economy.
The yield on the 10-year 7.8 percent securities due April 2021 was little changed at 8.75 percent in Mumbai today. The BSE India Sensitive Index dropped 1.6 percent and the rupee declined 0.7 percent to 49.30 per dollar.
India's inflation must ease before the central bank can reduce interest rates, Subbarao said Oct. 12, signaling policy makers may maintain a tight monetary stance for now.
India's benchmark wholesale-price inflation rate has stayed above 9 percent since the start of December and was 9.72 percent in September, according to the commerce ministry.
The governor in July predicted inflation to ease to 7 percent by March 31. He forecast India's economy will expand about 8 percent in the year through March from 8.5 percent in the previous year.
Subbarao has boosted the Reserve Bank's benchmark rate by 350 basis points since mid-March 2010, the fastest round of increases since the central bank was established in 1935, Bloomberg data show. The central bank's repurchase rate is 8.25 percent.
India's economy may expand at a slower pace than earlier estimated in the current fiscal year ending March 31 because of a faltering global economy and weakening industrial output, the finance ministry said today, without elaborating.