New Delhi: India’s wholesale price index rose 3.42% in the 12 months to 22 September, higher than previous week’s 3.23%, due to a rise in manufactured product prices, government data showed on 5 October.
The annual inflation rate was 5.43% during the corresponding week of the previous year.
The wholesale price index is more closely watched than the consumer price index, which is published monthly, because it covers a higher number of products and is published weekly.
The Reserve Bank of India (RBI) is concerned inflation may accelerate as record foreign investment has increased the cash available for commercial banks to lend. The central bank on 4 October increased the limit on the sale of bonds this year to drain excess money supply and check price gains.
“Higher liquidity leads to inflationary pressure,” said Dharmakirti Joshi, the Mumbai-based principal economist at rating company Crisil Ltd., the local unit of Standard & Poor’s. “The central bank would be looking at the upside risks to inflation. If the kind of inflows we have seen so far continues, they will have to raise the cash reserve ratio.”
RBI has been relying on the cash reserve ratio, or the proportion of deposits that lenders need to place with it as reserves, to curb bank lending and check consumer demand. It has raised it four times since December, which has helped slow loans growth and inflation.