India’s Food Inflation Accelerates to Three-Month High
(Corrects to add that the increase was from a year earlier in the second paragraph, in story published Aug. 11.)
An index measuring wholesale prices of agricultural products including rice, wheat and lentils rose 9.9 percent in the week ended July 30 from a year earlier, the commerce ministry said in an e-mailed statement today. That’s the most since the week ended April 23.
Reserve Bank of India Governor Duvvuri Subbarao, whose term this week was extended by two years, has to weigh the risks to economic growth as he tightens monetary policy to counter inflation. Stocks across Asia fell today on concern Europe will fail to contain its debt crisis, undermining the world economy.
“If food inflation increases and the global situation deteriorates, the RBI will be in a spot,” Anubhuti Sahay, a Mumbai-based analyst at Standard Chartered Plc, said before the report. “Its still too early to say if the RBI will hit the pause button on interest rates.”
Judging by current data, the central bank will likely increase its repurchase rate by a quarter of a percentage point to 8.25 percent in their Sept. 16 policy meeting, Sahay said.
India’s 10-year bonds fell after the food inflation report. The yield on the 7.80 percent note due April 2021 was at 8.22 percent at 11:55 a.m. in Mumbai, compared with 8.20 percent before the data was published, according to the central bank’s trading system. The rate was 8.19 percent yesterday.
The MSCI Asia Pacific Index dropped 0.5 percent to 122.23 as the cost of protecting the government debt of Greece, Italy, Spain and France rose. The Bombay Stock Exchange Sensitive Index declined 0.2 percent.
The Reserve Bank has increased rates 11 times since mid- March 2010.
To contact the editor responsible for this story: Stephanie Phang at email@example.com.