India’s central bank must raise borrowing costs to cool inflation, Prime Minister Manmohan Singh’s top economic adviser said, four days before the next monetary policy announcement.
“Given the persistent high inflation, we recommend tightening of the monetary policy,” Chakravarthy Rangarajan, chairman of the Prime Minister’s Economic Advisory Council, said at a press conference in New Delhi today.
Governor Duvvuri Subbarao is under pressure to raise interest rates on July 27 to tame prices in India, where three in four people live on less than $2 a day. The benchmark wholesale-price inflation rate has remained over 10 percent for five straight months.
Subbarao has increased rates three times since mid-March by a quarter-point each. The benchmark reverse repurchase rate is 4 percent and the repurchase rate is 5.5 percent.
India’s wholesale-price inflation rate rose 10.55 percent in June after climbing to a 19-month high of 11.23 percent in April.
Ten-year government bond yields were little changed at 7.67 percent at 3:30 p.m. in Mumbai after climbing earlier today to 7.69 percent, their highest level in more than a month. The Bombay Stock Exchange’s Sensitive Index rose 0.1 percent.