New Delhi: India’s wholesale price index rose 4.80% in the 12 months to June 2, lower than the previous week’s increase of 4.85%, due to a decline in food and energy prices, government data showed on 15 June.
The annual inflation rate was the lowest since end-July last year when it stood at 4.72%. It matched a median forecast in a Reuters poll of analysts.
Inflation may accelerate after industrial production growth announced this week was faster than expected, suggesting consumer demand remains strong. Higher prices of crude and palm oil, India’s biggest imports, may also drive prices higher in the world’s second-fastest growing economy.
“With the economy strong, the central bank likely sees that it has room to tighten,” Bear Stearns & Co. economists Ritu Kochhar and Tim Kearney said in a note on June 13. “Inflationary pressures will persist as long as global commodity prices remain high and supply constraints in the domestic economy are not resolved.”
India’s industrial production grew 13.6% in April, the government said on June 12. India’s economy has averaged an 8.6% growth since 2003, the second-fastest after China among the major economies, causing demand for manufactured and farm goods to outstrip supply and stoking prices higher.
The Reserve Bank of India, which has raised its key interest rates nine times since October 2004, will announce its next monetary policy on July 31. The central bank has surprised analysts three times since December by announcing policy actions before its scheduled monetary policy review.
To combat inflation, the Reserve Bank has also allowed the rupee to gain to near a nine-year high to make imports cheaper. It has slowed dollar purchases on concern rupee funds injected from the exercise will stoke the inflation.
The government today revised the inflation rate for the week ended April 7 to 6.44 percent from 6.09 percent. The government revises the inflation rate after a delay of two months on additional price data.