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

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:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

China Economy

China Economy

China's growth slowest since global crisis, annual target at risk  Full Article 

Coal Reforms

Coal Reforms

Factbox - India pushes ahead with coal reforms  Full Article 

Apple Result

Apple Result

Apple's iPhone sales beat Street but iPad volumes slide  Full Article 

Airport Accident

Airport Accident

Total CEO de Margerie killed in Moscow plane accident - airport spokeswoman.  Full Article 

Nadella's Paycheck

Nadella's Paycheck

New Microsoft CEO Nadella's pay tops $80 mln with big stock awards.  Full Article 

Deregulation Impact

Deregulation Impact

Private fuel retailers to dip toe, not dive back, into India  Full Article 

JLR China

JLR China

JLR sees 20 percent growth in China sales this year - exec  Full Article 

An RBI First

An RBI First

RBI releases minutes of financial stability council's Aug meet  Full Article 

Reuters India Mobile

Reuters India Mobile

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