India’s Central Bank (Reuters)
According to The Wall Street Journal, MUMBAI—The Reserve Bank of India Monday sounded concerned about inflation that it said would remain outside its comfort zone this fiscal year, amid expectations that controlling prices would remain the prime focus when the central bank reviews monetary policy Tuesday.
In its half-yearly review of macroeconomic and monetary developments, released a day before its monetary-policy meeting, the RBI also highlighted the need to boost economic growth. But its stress was more on inflation.
Inflation at the wholesale level—the main measure of prices in India—notched a seven-month high of 6.46% in September. It has remained above the central bank’s comfort level of 5.0% for four consecutive months through September.
Based on the prices that consumers pay, inflation is near the double-digit level. Authorities are particularly worried about food inflation, as the prices of vegetables such as onions have jumped sharply in recent months as heavy rains damaged crops.
Inflation is also fanned by a fall in the value of the local rupee currency, as it made imported commodities, such as oil, more expensive for Indian consumers.
The RBI said it expects both consumer and wholesale inflation to be sticky around their current levels. “This indicates persistence of inflation at levels distinctly above what was indicated by the Reserve Bank earlier in the year,” it said.
The RBI said it also cannot ignore risks to growth.
For Governor Raghuram Rajan, balancing the central bank’s policy to address both inflation and growth would be a complicated task. The former International Monetary Fund official raised the RBI’s main lending rate by a quarter percentage point in September, in the first monetary-policy review after he took over as the RBI governor.
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