India’s inflation exceeded 9 percent for an 11th straight month, crimping the central bank’s scope to keep interest rates unchanged and shield the economy from a faltering global recovery.
The benchmark wholesale-price index rose 9.73 percent in October from a year earlier, the commerce ministry said in a statement in New Delhi today. That compares with a 9.72 percent jump in September and the median forecast of 9.65 percent in a Bloomberg News survey of 19 economists.
Asian nations from Indonesia to South Korea are either cutting rates or keeping them on hold to protect expansion as Europe’s debt crisis threatens to trigger a global slump. India’s central bank last month signaled it’s nearing the end of monetary tightening, provided inflation slows, after it raised rates for the 13th time since mid-March 2010.
“Prices are not coming off,” said Madan Sabnavis, chief economist at Mumbai-based ratings company Credit Analysis & Research Ltd. “The RBI will have to probably revisit its guidance if inflation remains elevated.”
The BSE India Sensitive Index declined 0.4 percent at the close in Mumbai. The yield on the 8.79 percent government security due November 2021 rose two basis points, or 0.02 percentage point, to 8.97 percent. The rupee fell 0.4 to 50.29 per dollar.
The currency has tumbled more than 11 percent this year, a decline the central bank has said risks stoking inflation.
Indian Oil Corp., the nation’s biggest refiner, increased local gasoline prices on Nov. 4 for the third time in six months to stem losses, saying the rupee’s decline boosted costs.
The Reserve Bank of India on Oct. 25 said that its monetary tightening will help curb inflation and that the likelihood of a rate action in the December policy meeting is “relatively low.”
India’s inflation will start to decline from December and ease to 7 percent by March before moderating further in the first half of the next fiscal year starting April 1, according to the central bank. Beyond December, “if the inflation trajectory conforms to projections, further rate hikes may not be warranted,” the Reserve Bank said.
RBI Deputy Governor Subir Gokarn said the October inflation data was on expected lines and there is no reason for a change in the guidance put out by the central bank in its monetary policy last month.
“Our guidance in October policy was based on current expectations of growth and inflation,” Gokarn told reporters today. “We haven’t seen anything after that, which might suggest that we need to revise that guidance based both on growth and inflation.”
The Reserve Bank predicted India’s economy will expand 7.6 percent in the year ending March 31, lower than the 8 percent it estimated earlier.
Governor Duvvuri Subbarao has increased the central bank’s repurchase rate by 375 basis points since the start of 2010. That’s the fastest round of increases since the monetary authority was established in 1935, Bloomberg data show. The repurchase rate is 8.5 percent.
The rate rises have started to hurt consumer demand. India’s industrial production grew 1.9 percent in September from a year earlier, the slowest pace in two years. India’s automakers on Oct. 10 cut their car sales growth forecast for a second time this year as companies including Honda Motor Co. and Ford Motor Co. faced lower demand.
Subbarao said last month that the central bank gave the guidance on rates to help boost investment.