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RPT-UPDATE 1-India sees broad recovery, but inflation building
(Repeats story issued late on Monday)
* Indian growth seen consolidating
* Demand-side inflation emerges as a concern
* Exchange rate flexibility brings burdens (Recasts; adds quotes, background, byline)
By Paul Eckert
WASHINGTON, April 26 (Reuters) - Rising prices for food, fuel and wages are contributing to inflationary pressure that is a worry in India's otherwise good post-crisis economic prospects, the country's central bank governor said on Monday.
"The big picture is that growth is consolidating and getting broad-based, supply-side inflation pressures are abating but only gradual, and meanwhile demand-side inflation pressures are building up," Reserve Bank of India Governor Duvvuri Subbarao said in a speech in Washington.
He said the wholesale price index has risen to nearly 10 percent in March from a negative rate of broad inflation last August.
And while much of the country's inflationary pressures were on the supply-side as a result of the 2009 monsoon failure that pushed up food prices, "recent evidence is that inflation is getting more generalized and that demand-side pressures are building up," Subbarao said.
Price increases in nonfood manufacturing, fuel, nonskilled labor wages and real estate in big cities -- "all these numbers show that demand-side pressures are building up," he said.
Forced to respond with stimulus policies to the global financial crisis, which hit Indian exports and financial markets, India notched growth of 7.2 percent in the 2009 fiscal year.
But Indian authorities "need to be quite calibrated" in the absence of a sufficient uptick in private consumption and private investment, Subbarao noted.
"There is some concern, although not as much as advanced economies, about whether withdrawal of fiscal and monetary stimulus will impact growth," he said.
Following several days of meetings of the Group of 20 major economies and the International Monetary Fund, Subbarao was speaking at the Peterson Institute for International Economics.
Although that Washington think-tank has been among the most prominent of U.S. critics of China's policy of intervening in currency markets to keep its yuan low in order to boost exports, the Indian central bank chief did not mention China by name in discussing monetary policy challenges.
"We intervene in the market only to manage volatility of the exchange rate and to prevent destruction to the macroeconomic situation. We are not targeting a rate or a band," said Subbarao.
"If the global system is one and we have a more flexible exchange rate but some other countries do not ... the burden of adjustment will fall on us," he said.
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