NEW DELHI: India’s inflation surged to a six-month high in August, data showed yesterday, strengthening chances the new central bank governor will freeze interest rates despite a struggling economy.
Inflation, as measured by the Wholesale Price Index, hit 6.10 percent in August from a year earlier and was up from 5.79 percent in July.
“Rising wholesale price inflation will take rate cuts off the agenda until well into next year,” said Capital Economics economist Daniel Martin.
The data comes as former International Monetary Fund chief economist Raghuram Rajan, famed for forecasting the 2008 global financial meltdown, prepares to chair his first monetary policy-setting meeting on Friday.
India’s once-booming economy is caught in a quagmire of sharply slowing growth, stubbornly high inflation and a record current account deficit that has pushed the rupee sharply lower.
Rajan has already declared he sees his main role as sustaining “low and stable expectations of inflation” and analysts said he could not ignore the latest price data.
They said the impact of the rupee’s sharp fall on the price of fuel, most of which is imported, and other commodities would also soon start showing up in the inflation figures.
The August data surprised markets which expected the figure to be in line with July’s.
The inflation increase was driven mainly by food price rises due to crop damage caused by monsoon flooding.
Onion prices, a dietary staple especially for the poor masses, soared a massive 245 percent from a year earlier while the cost of fruit, eggs and other goods also climbed.
AFP
