By -
Sep 12, 2014
Indian retail inflation held near 8
percent while growth in factory output slowed more than
economists had estimated before the central bank reviews one of
Asia’s highest interest rates.
Consumer prices rose 7.8 percent in August from a year earlier, compared with 7.96 percent in July, the Statistics Ministry said in New Delhi today. The median of 37 estimates in a Bloomberg survey had been for a 7.83 percent increase. Industrial production rose 0.5 percent in July, compared with 1.8 percent predicted in a separate survey and a revised 3.94 percent gain in June.
The $1.9 trillion economy will benefit if the Reserve Bank of India cools inflation, Governor Raghuram Rajan said last month after keeping interest rates unchanged for a third straight meeting. The RBI is battling Asia’s strongest price pressures, which are damping investment essential for Prime Minister Narendra Modi to meet tax revenue targets.
“Both data sets clearly signal that the RBI is headed for an extended pause,” said Rupa Rege-Nitsure, a Mumbai-based economist at Bank of Baroda. “The government has to address the problem of food inflation on a war footing, otherwise we will not see any material change here.”
Food and beverage prices rose 9.16 percent year-on-year, led by a 24 percent surge in fruits and 15 percent in vegetables. Fuel costs climbed 4.15 percent, today’s data showed.
The rupee strengthened 0.5 percent to 60.66 per dollar in Mumbai before the data were released, the S&P BSE Sensex index of stocks gained 0.2 percent and the yield on the benchmark 10-year sovereign bond fell to 8.50 percent from 8.51 percent.
A dip in crude oil prices and a pick-up in monsoon rainfall, which has the potential to raise farm output, may help contain inflation only in the short-term, Upasna Bhardwaj, an economist at ING Vysya Bank Ltd. in Mumbai, said by phone before the data. The government needs to rein in subsidies instead of counting on taxes to meet its budget deficit target of 4.1 percent of gross domestic product, a seven-year low, she said.
The economy expanded 5.7 percent in the quarter through June 30 from a year earlier, the fastest pace since 2012. GDP will grow 5.6 percent in the fiscal year through March 2015 and 6.5 percent in the following 12 months, according to Goldman Sachs Group Inc.
Goldman has scrapped its rate-increase forecast, Mumbai-based economist Tushar Poddar wrote in a Sept. 9 report. “We now expect the policy repo rate to stay at 8 percent for a protracted period of time -– through 2014 and 2015.”
The U.S. bank had earlier expected a 50-basis-point increase in the benchmark repurchase rate this year followed by a reduction of the same magnitude in the second half of 2015.
To contact the reporter on this story: Jeanette Rodrigues in New Delhi at jrodrigues26@bloomberg.net
To contact the editors responsible for this story: Daniel Ten Kate at dtenkate@bloomberg.net Sam Nagarajan, Dick Schumacher
Consumer prices rose 7.8 percent in August from a year earlier, compared with 7.96 percent in July, the Statistics Ministry said in New Delhi today. The median of 37 estimates in a Bloomberg survey had been for a 7.83 percent increase. Industrial production rose 0.5 percent in July, compared with 1.8 percent predicted in a separate survey and a revised 3.94 percent gain in June.
The $1.9 trillion economy will benefit if the Reserve Bank of India cools inflation, Governor Raghuram Rajan said last month after keeping interest rates unchanged for a third straight meeting. The RBI is battling Asia’s strongest price pressures, which are damping investment essential for Prime Minister Narendra Modi to meet tax revenue targets.
“Both data sets clearly signal that the RBI is headed for an extended pause,” said Rupa Rege-Nitsure, a Mumbai-based economist at Bank of Baroda. “The government has to address the problem of food inflation on a war footing, otherwise we will not see any material change here.”
Food and beverage prices rose 9.16 percent year-on-year, led by a 24 percent surge in fruits and 15 percent in vegetables. Fuel costs climbed 4.15 percent, today’s data showed.
RBI Targets
The central bank is within reach of its goal of capping the inflation rate at 8 percent by January 2015, while there are upside risks to the 6 percent target by January 2016, according to an Aug. 21 RBI report. Growth concerns are broadly balanced, it said. The monetary authority is scheduled to review borrowing costs on Sept. 30.The rupee strengthened 0.5 percent to 60.66 per dollar in Mumbai before the data were released, the S&P BSE Sensex index of stocks gained 0.2 percent and the yield on the benchmark 10-year sovereign bond fell to 8.50 percent from 8.51 percent.
A dip in crude oil prices and a pick-up in monsoon rainfall, which has the potential to raise farm output, may help contain inflation only in the short-term, Upasna Bhardwaj, an economist at ING Vysya Bank Ltd. in Mumbai, said by phone before the data. The government needs to rein in subsidies instead of counting on taxes to meet its budget deficit target of 4.1 percent of gross domestic product, a seven-year low, she said.
The economy expanded 5.7 percent in the quarter through June 30 from a year earlier, the fastest pace since 2012. GDP will grow 5.6 percent in the fiscal year through March 2015 and 6.5 percent in the following 12 months, according to Goldman Sachs Group Inc.
Goldman has scrapped its rate-increase forecast, Mumbai-based economist Tushar Poddar wrote in a Sept. 9 report. “We now expect the policy repo rate to stay at 8 percent for a protracted period of time -– through 2014 and 2015.”
The U.S. bank had earlier expected a 50-basis-point increase in the benchmark repurchase rate this year followed by a reduction of the same magnitude in the second half of 2015.
To contact the reporter on this story: Jeanette Rodrigues in New Delhi at jrodrigues26@bloomberg.net
To contact the editors responsible for this story: Daniel Ten Kate at dtenkate@bloomberg.net Sam Nagarajan, Dick Schumacher
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