Cherian Thomas, Bloomberg
New Delhi: India’s inflation was unchanged at near a two-year high, adding pressure on the central bank to further raise borrowing costs.
The key wholesale price inflation rate remained at 6.46% in the week ended 10 March, the Ministry of Commerce & Industry said in a weekly report released in New Delhi today. Analysts estimated the inflation rate would be 6.50%.
The central bank may raise borrowing costs further to slow loan growth and contain inflation that has stayed above the Reserve Bank of India’s tolerance level of 5% since September. Loans in India have growth at the fastest pace in three decades, which along with higher salaries have stoked prices of cement, steel and other manufactured products.
“The central bank will maintain its tight monetary stance,” said D. H. Pai Panandiker, president, RPG Foundation, an economic policy group in New Delhi. “It will increase borrowing costs with one of the many tools at its disposal.”
Over the past year, the Reserve Bank has used policy tools including the overnight borrowing and lending rates and the cash reserve ratio, or the proportion of cash banks have to set aside with the central bank, to curb inflation.
The Reserve Bank of India has raised its key overnight lending rate five times in the past year to contain inflation. This month, it resumed the sale of so-called market stabilization bonds after a gap of almost two years to mop up excess cash in the banking system.
The central bank is scheduled to announce its next monetary policy on 24 April.
The government today revised the inflation rate for the week ended 13 January to 6.15% from 5.95%. The government revises the inflation rate after a delay of two months on additional price data.