India’s retail inflation slowed more than economists had estimated after central bank Governor Raghuram Rajan held one of Asia’s highest interest rates for a fourth straight meeting.
Consumer prices rose 6.46 percent in September from a year earlier, the slowest pace since the index was created in January 2012 and compared with 7.73 percent in August, the Statistics Ministry said in New Delhi yesterday.
The median of 42 estimates in a Bloomberg survey had been for a 7.11 percent gain. While the Reserve Bank of India seems set to achieve its 8 percent CPI target for January, its goal of 6 percent a year later is in doubt, Rajan said Sept. 30.
Lower inflation or a narrower budget deficit may lead to sustainable growth and boost India’s credit rating after Standard & Poor’s last month raised its outlook to stable from negative.
“Inflation could fall below 6 percent, but subsequently it will rise and by January you will be back to 7 percent,” Prasanna Ananthasubramanian, chief economist at ICICI Securities Primary Dealership in Mumbai, said by phone.
“These numbers are a bit transient” and the RBI should wait until the first quarter of next year for more clarity, he said. The benchmark S&P BSE Sensex (SENSEX) lost 0.1 percent as of 12:12 p.m. in Mumbai today, the yield on the 10-year sovereign bond fell to 8.38 percent from 8.42 percent and the rupee was little changed at 61.12 per dollar.
Average consumer price-growth has eased from more than 10 percent last year as Rajan raised the benchmark repurchase rate to 8 percent from 7.25 percent since taking office 13 months ago. He kept it unchanged last month.
Growth, Subsidies
Asia’s third-biggest economy expanded 5.7 percent from a year earlier in the April-June quarter, the most in about two years, government data show. Growth is estimated at 5.5 percent in the year through March 2015 and 6.3 percent in the next 12 months, the RBI said in its Monetary Policy Report last month.
Rajan also urged the government to take advantage of the lowest oil prices in four years to free up fuel costs and reduce subsidies that contribute to one of Asia’s widest budget deficits.
Brent crude, a benchmark for more than half the world’s oil, has fallen 18 percent this year to about $88 per barrel, helping cut losses on sales of subsidized diesel.
Lower subsidies help improve public finances and contain inflation by optimizing usage. The government aims to cut its budget deficit to a seven-year-low of 4.1 percent of gross domestic product by the end of March.
The shortfall was 74.9 percent of the full-year goal as of end-August, compared with 74.6 percent in the same period of the previous year. Industrial production grew 0.4 percent in August from a year earlier, slower than the 2.6 percent median forecast in a Bloomberg survey, data showed last week.
Wholesale-price (INFINFY) inflation eased to a five-year low of 2.38 percent in September, the Commerce Ministry said in a statement today. Food and beverage prices rose 7.56 percent in September, slower than the previous month’s 9.2 percent gain, according to yesterday’s CPI report.
Vegetable costs eased to 8.6 percent from 15 percent and fuel inflation was 3.45 percent compared with 4.15 percent.
bloomberg.com
Consumer prices rose 6.46 percent in September from a year earlier, the slowest pace since the index was created in January 2012 and compared with 7.73 percent in August, the Statistics Ministry said in New Delhi yesterday.
The median of 42 estimates in a Bloomberg survey had been for a 7.11 percent gain. While the Reserve Bank of India seems set to achieve its 8 percent CPI target for January, its goal of 6 percent a year later is in doubt, Rajan said Sept. 30.
Lower inflation or a narrower budget deficit may lead to sustainable growth and boost India’s credit rating after Standard & Poor’s last month raised its outlook to stable from negative.
“Inflation could fall below 6 percent, but subsequently it will rise and by January you will be back to 7 percent,” Prasanna Ananthasubramanian, chief economist at ICICI Securities Primary Dealership in Mumbai, said by phone.
“These numbers are a bit transient” and the RBI should wait until the first quarter of next year for more clarity, he said. The benchmark S&P BSE Sensex (SENSEX) lost 0.1 percent as of 12:12 p.m. in Mumbai today, the yield on the 10-year sovereign bond fell to 8.38 percent from 8.42 percent and the rupee was little changed at 61.12 per dollar.
Average consumer price-growth has eased from more than 10 percent last year as Rajan raised the benchmark repurchase rate to 8 percent from 7.25 percent since taking office 13 months ago. He kept it unchanged last month.
Growth, Subsidies
Asia’s third-biggest economy expanded 5.7 percent from a year earlier in the April-June quarter, the most in about two years, government data show. Growth is estimated at 5.5 percent in the year through March 2015 and 6.3 percent in the next 12 months, the RBI said in its Monetary Policy Report last month.
Rajan also urged the government to take advantage of the lowest oil prices in four years to free up fuel costs and reduce subsidies that contribute to one of Asia’s widest budget deficits.
Brent crude, a benchmark for more than half the world’s oil, has fallen 18 percent this year to about $88 per barrel, helping cut losses on sales of subsidized diesel.
Lower subsidies help improve public finances and contain inflation by optimizing usage. The government aims to cut its budget deficit to a seven-year-low of 4.1 percent of gross domestic product by the end of March.
The shortfall was 74.9 percent of the full-year goal as of end-August, compared with 74.6 percent in the same period of the previous year. Industrial production grew 0.4 percent in August from a year earlier, slower than the 2.6 percent median forecast in a Bloomberg survey, data showed last week.
Wholesale-price (INFINFY) inflation eased to a five-year low of 2.38 percent in September, the Commerce Ministry said in a statement today. Food and beverage prices rose 7.56 percent in September, slower than the previous month’s 9.2 percent gain, according to yesterday’s CPI report.
Vegetable costs eased to 8.6 percent from 15 percent and fuel inflation was 3.45 percent compared with 4.15 percent.
bloomberg.com
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