New Delhi: India’s annual inflation based on wholesale prices could hit 6% by March, above the Reserve Bank of India’s (RBI) July forecast of around 5%, a deputy governor of the central bank said on Friday.
Economists say higher inflation could put pressure on the central bank to bring forward an exit from its accommodative monetary policy stance although RBI officials have been saying that it may be prolonged to aid an economic recovery.
“We have always said by March it should be 5%, it may become 6%,” RBI deputy governor K C Chakrabarty told reporters on the sidelines of a conference.
Some analysts expect the WPI index to rise past 6% while Kotak Mahindra Bank expected it to rise to 8.0% by the end of March.
The 10-year bond yield rose 2 basis points to 7.08% immediately after Chakrabarty’s comment.
At 11.20 a.m., it was trading at 7.07%, 7 basis points below Thursday’s close, helped by RBI deputy governor Shyamala Gopinath’s comment in New York overnight that it was too soon for the central bank to unwind its accommodative monetary policy.
A surge in food prices unexpectedly pushed the annual change in the wholesale price index into positive in early September, after staying in the negative zone for three months.
The WPI rose 0.12% in the year to 5 September from the previous week’s 0.12% fall.
The food articles sub-index rose an annual 15.4%, up from the previous week’s 14.8% rise, as a dry spell hit nearly half of India’s districts, hurting summer crops and prompting the government to take steps to raise supplies.
Chakrabarty said the increase in prices at which the government buys food grains from farmers was also responsible for the acceleration in food inflation.
“If we increase the procurement prices every year by 10% or more than 10%, we cannot say food inflation will be less than 10%,” he said.