Sept. 29 (Bloomberg) -- India’s food inflation accelerated for the first time in four weeks, maintaining pressure on the central bank to raise borrowing costs to tame price gains.
An index measuring wholesale prices of agricultural products gained 9.13 percent in the week ended Sept. 17 from a year earlier, the commerce ministry said in a statement in New Delhi today. It rose 8.84 percent the previous week.
The rate of inflation in the world’s second-most populous nation remains above the level the central bank deems acceptable and has been “fairly stubborn,” Governor Duvvuri Subbarao said this week as he weighs the risks to expansion posed by a faltering global recovery against price pressures. The Reserve Bank of India extended its record series of rate increases on Sept. 16 to curb the fastest inflation among the so-called BRICS economies.
“Inflation is still at elevated levels and that remains a concern for the central bank,” Anubhuti Sahay, a Mumbai-based economist at Standard Chartered Plc, said before the report. She expects the Reserve Bank to boost its repurchase rate by a quarter of a percentage point to 8.5 percent in October.
The yield on the 7.8 percent bonds due April 2021 rose 1 basis point, or 0.01 percentage point, to 8.35 percent as of 12:15 p.m. in Mumbai. The Bombay Stock Exchange Sensitive Index declined 0.2 percent, and the rupee weakened 0.3 percent against the U.S. dollar. The currency has dropped 8.6 percent this quarter, the most in Asia after the South Korean won.
Accelerating food prices are a “matter of serious and grave concern,” Finance Minister Pranab Mukherjee said today. Pushing growth in India to above 9 percent may cause high inflation and officials should use monetary policy to bring down demand, Chakravarthy Rangarajan, chairman of the Prime Minister’s Economic Advisory Council, said in New Delhi today.
Policy makers boosted India’s repurchase rate for the sixth time this year on Sept. 16, increasing benchmark borrowing costs by a quarter of a percentage point to 8.25 percent. Indian wholesale prices rose 9.78 percent in August from a year earlier.
Deputy Governor Subir Gokarn said last week the central bank is close to the end of its cycle of rate increases as inflation will probably slow next year. Production of grains sowed during the June to September rainy season may climb 3 percent from a year earlier to 123.9 million metric tons, the Farm Ministry said on Sept. 14.
Onion prices rose 17 percent in the week ended Sept. 17 from a year earlier, today’s report showed. Potato costs increased 15 percent while prices of vegetables climbed 12 percent, according to the report.
Inflation may accelerate after Indian Oil Corp., the country’s biggest refiner, raised gasoline prices on Sept. 16 for the second time in four months. Losses from selling fuels below cost are increasing following the rupee’s drop, Indian Oil Finance Director P.K. Goyal said Sept. 15.
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