Wholesale prices climb for fourth straight week

Wholesale prices climb for fourth straight week
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First Published: Thu, Oct 08 2009. 11 04 PM IST

Tough task: Reserve Bank of India governor D. Subbarao. Abhijit Bhatlekar / Mint
Tough task: Reserve Bank of India governor D. Subbarao. Abhijit Bhatlekar / Mint
Updated: Thu, Oct 08 2009. 11 04 PM IST
New Delhi: India’s wholesale prices rose for a fourth week, making it harder for central bank governor D. Subbarao to keep interest rates low and boost economic growth without fanning inflation.
Tough task: Reserve Bank of India governor D. Subbarao. Abhijit Bhatlekar / Mint
The benchmark Wholesale Price Index climbed 0.7% in the week to 26 September from a year earlier, after rising 0.83% in the previous week, the commerce ministry said on Thursday. That compared with the median forecast for a 1% gain in a Bloomberg survey of 20 economists.
“The Reserve Bank of India’s communications are likely to be increasingly hawkish in a bid to manage inflationary expectations,” said Sujan Hajra, chief economist at Anand Rathi Financial Services Ltd in Mumbai. “India’s monetary authorities face a quandary.”
India’s wholesale prices rose in September after declining for three months, and consumer price inflation is already running above 10%.
Finance minister Pranab Mukherjee said on Wednesday inflation may accelerate to as high as 6% by the end of March, more than the central bank’s 5% estimate. Subbarao said this week India may have to raise interest rates ahead of advanced economies in view of incipient inflationary pressures.
India needs a careful management of trade-offs between supporting growth with lower borrowing costs and curbing inflation, the governor said in Istanbul on 5 October.
Consumer prices paid by farm workers jumped 12.89% in August from a year earlier. Inflation for rural workers was 12.67% and consumer prices paid by industrial workers climbed 11.72%.
With inflation coming higher than expected, rate hikes are coming closer, Pranjul Bhandari and Tushar Poddar, Mumbai- based economists with Goldman Sachs Group Inc., wrote in a report. They expect India’s first rate increases in January and predict the central bank may raise the reverse-repurchase rate by 300 basis points in 2010 to 6.25%.
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First Published: Thu, Oct 08 2009. 11 04 PM IST