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Inflation way above RBI comfort level: Subbarao
July 16, 2012 / 1:03 PM / 5 years ago

Inflation way above RBI comfort level: Subbarao

MUMBAI (Reuters) - India’s wholesale and consumer price inflation levels are way above the Reserve Bank of India’s comfort lines, central bank Governor Duvvuri Subbarao said on Monday.

Reserve Bank of India (RBI) Governor Duvvuri Subbarao attends the monetary policy review meeting in Mumbai October 25, 2011. REUTERS/Danish Siddiqui/Files

India’s wholesale price index (WPI), the main inflation gauge, rose to a lower-than-expected annual 7.25 percent in June, its slowest rate since January, helped by moderation in fuel prices.

“Certainly high inflation leads to loss of growth, and WPI at 7.25 percent as per the number that came this morning, and CPI inflation in double digits - we are way above that threshold,” Subbarao said in a speech.

The RBI’s threshold level for inflation is around 5 percent, he said.

Most analysts have said Monday’s inflation data is unlikely to prompt the RBI to cut rates at its monetary policy review on July 31 because inflation expectations still remain high.

Economists are cautious that poor rains could drive up food prices, causing headline inflation to climb.

The annual rains are crucial for farm output and economic growth as about 55 percent of India’s arable land is rain-fed. The farm sector accounts for about 15 percent of the nearly $2 trillion economy.

Reporting by Suvashree Dey Choudhury; Editing by Hugh Lawson

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