Inflation likely picked up in November

BANGALORE Tue Dec 11, 2012 9:13am IST

A vendor carries a basket of bananas to sell at a market in Kolkata October 15, 2012. REUTERS/Rupak De Chowdhuri/Files

A vendor carries a basket of bananas to sell at a market in Kolkata October 15, 2012.

Credit: Reuters/Rupak De Chowdhuri/Files

Related Topics

Rajalakshmi (C), 28, smiles after winning the Miss Wheelchair India beauty pageant in Mumbai November 26, 2014. REUTERS/Danish Siddiqui

Miss Wheelchair India

Seven women from across India participated in the country's second wheelchair beauty pageant, which aims to open doors for the wheelchair-bound in modelling, film and television, according to organisers  Slideshow 

BANGALORE (Reuters) - Inflation probably picked up in November as a weak currency pushed up the price of imported fuel, adding to the challenges facing a central bank torn between fighting rising prices and an economic slowdown, a Reuters poll showed.

A Reuters poll of 32 economists taken over the past week showed they expect wholesale prices rose 7.60 percent in November from a year earlier, compared with 7.45 percent in October. Forecasts ranged from 7.12 percent to 8.10 percent.

Wilting economic growth has prompted calls from the government and business leaders for the Reserve Bank of India to cut interest rates, but it has so far rejected them, saying prices are still rising too fast to ease policy.

"The WPI inflation likely increased slightly despite a favourable base. (The) decline in the Indian rupee over the month more than offset the fall in global commodity prices, and may have supported imported inflationary pressures," said Abhishek Upadhyay, an economist at Axis Bank.

Primary articles like food and fuel make up over a third of the wholesale price index, and their high cost has kept inflation stubbornly strong. The data will be released on Friday.

Renewed weakness in the rupee added to the pressure, with its almost 1 percent drop last month pushing costs of imports, mainly crude oil, higher. Compared with a year earlier, the rupee was down about 4 percent against the dollar.

The economy extended its slump into the three months to September, growing an annual 5.3 percent, and is headed for its weakest full-year growth in a decade.

In an unexpected move, RBI Governor Duvvuri Subbarao gave fairly explicit policy guidance at the October meeting, saying the RBI might ease policy in January to March, the final quarter of the fiscal year, when it expects inflationary pressure to ease.

"Even if inflation has started showing signs of moderation, it is still way above the RBI's comfort level and I don't see any rate action in December's policy review," said Rupa Rege Nitsure, at Bank of Baroda.

The RBI has left the repo rate on hold at 8 percent since April this year but slashed the cash reserve ratio to 4.25 percent, its lowest since 1976. The move was expected to inject 175 billion rupees into the banking system to pre-empt a potential tightening of liquidity.

A headline inflation rate of 5 percent is commonly perceived as the RBI's comfort level and it has stayed above 7 percent through this year, although lower than the 9.5 percent it averaged in the previous two years.

(Polling by Somya Gupta; Editing by Kim Coghill)

FILED UNDER:

SAARC Summit

REUTERS SHOWCASE

E-Commerce Boom

E-Commerce Boom

Online grocers come up trumps in India's e-commerce boom   Full Article 

Reuters Poll

Reuters Poll

GDP growth to slow to 5.1 pct, but no rate cut yet  Full Article 

Oil Prices Fall

Oil Prices Fall

Oil at four-year low as OPEC production cut looks unlikely  Full Article 

Hughes Dies

Hughes Dies

Australia batsman Hughes passes away aged 25  Full Article 

Google in Europe

Google in Europe

Insight - Behind Google's Europe woes, American accents  Full Article 

India-focused Funds

India-focused Funds

India-focused hedge funds up over 40 pct YTD - HFR  Full Article 

Trade Deal

Trade Deal

WTO postpones trade deal by a day after last-minute objection.  Full Article 

Land Disputes

Land Disputes

Disputes over land for industry on the rise in India, angering locals - charities  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage