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Food Inflation Rate in India Stays Above 10%, Raising Pressure on Rates
India’s food inflation rate stayed above 10 percent for a 14th straight month, increasing pressure on the central bank to raise interest rates next week.
An index measuring wholesale prices of agriculture products including lentils, rice and vegetables compiled by the commerce ministry rose 12.47 percent in the week ended July 10 from a year earlier, according to a statement released in New Delhi today. It gained 12.81 percent the previous week.
Prime Minister Manmohan Singh’s government is concerned persistently high food prices will lead to more wage demands, adding to inflationary pressures. Finance Minister Pranab Mukherjee said July 20 sufficient rains this year will help boost agriculture production and cool prices.
“Inflationary pressures have not been subdued as yet,” N.R. Bhanumurthy, an economist at the New Delhi-based National Institute of Public Finance and Policy, said before the release. He expects the central bank to raise rates by a quarter-point in the monetary policy announcement on July 27.
The Reserve Bank of India has increased its benchmark rates three times since mid-March by a quarter-point each.
The weather office forecasts the June-September monsoon rains, the main source of irrigation in the country, to be adequate for farming this year. Last year’s rains were the least since 1972.
To contact the reporter on this story: Tushar Dhara in New Delhi at tdhara1@bloomberg.net
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