While retail inflation soared to a nine-month high of 11.24 per cent in November, the index based on wholesale prices zoomed to a 14-month high of 7.52 per cent last month.
Monetary Policy- Easing expected to happen later this financial year.
In its 'Asia Economic Alert', the banking and asset management behemoth also said that the Reserve Bank is likely to hike the short-term lending (repo) rate by 100 basis points in 2011 with the purpose of curbing inflationary pressure.
RBI has cut policy rate thrice during 2015.
His comments poured cold water on hopes that the central bank may have a rethink on rates after the wholesale price index, the main inflation gauge, rose a lower-than-expected annual 7.25 per cent in June, its slowest rise since January, helped by moderation in fuel prices.
Prime Minister's Economic Advisory Council (PMEAC) Chairman C Rangarajan may have found the Reserve Bank of India (RBI)'s inflation projections on the higher side, but independent experts agree with the central bank and expect both wholesale and retail prices to remain high.
The wholesale price-based inflation hovered over seven per cent through 2012, down from 10 per cent inflation seen in the previous year, reflecting the impact of tight money policy of the Reserve Bank of India.
After unseasonal rains, supply disruptions and pandemic-induced woes pushed retail inflation well over the Reserve Bank's comfort zone in 2020, the scenario is likely to stay that way at least in the short term as economic recovery slowly gains foothold. For most part of this year, pricier food items pushed the retail inflation, based on Consumer Price Index (CPI), higher in the range of 6.58-7.61 per cent, except for March when the reading was 5.91 per cent. Experts believe retail inflation is likely to average around 6.3 per cent this fiscal and mostly will remain sticky going forward owing to pick-up in demand across sectors.
The rupee appreciated 7 paise to 79.74 against the US dollar in early trade on Thursday as a positive trend in domestic equities supported the local unit. However, a strong American currency overseas and forex outflows restricted the rupee's gain, dealers said. At the interbank foreign exchange, the rupee opened at 79.72 against the American dollar, then went lower to trade at 79.74 against the greenback in early deals, registering a gain of 7 paise over the last close.
'Commerce Minister Piyush Goyal once told me that if onion prices rise we will face the flak for it across India.' 'What can farmers expect from a government which talks like a trader and only believes in (electoral) profit and loss?'
Emerging markets such as India have always run higher inflation rates than developed economies such as the US and countries of Western Europe. But for the first time in the past 30 years, the US reported a higher consumer price inflation (CPI) rate than India in five consecutive months. The US reported a CPI rate of 7.5 per cent in January 2022 against 6.01 per cent in India and analysts expect the trend to continue for at least a few months more
The central bank is widely expected to increase the repo rate by 25 basis points on Tuesday to 7.75 per cent to fight inflation even as it continues to unwind its rupee defense steps, a Reuters poll showed.
Food inflation in April stood at 6.08 per cent, while the overall WPI inflation fell to a three-year low of 4.89 per cent.
Banking sources said the debt recast is actually 'Plan B' to help the nation's largest retailer stay afloat.
PSU bank shares were the top gainers on hopes of a rate by the RBI on easing consumer inflation
Benchmark 10-year bond yields hit a 13-month peak as bond traders priced in more aggressive monetary easing next year.
Inflation in food articles during June stood at 2.04 per cent, as against 1.13 per cent in May.
'The shadow banks are currently facing a liquidity and solvency crisis.' 'The danger is that it could potentially engulf the entire financial system because shadow banks have borrowed huge amount of money from banks, mutual funds, pension funds, and insurance companies.'
'The robust tax collections give the finance minister a fair amount of headroom for an expansionary fiscal policy.'
The RBI's next policy review is set for Sept. 29.
Consumer price inflation touched a nine-month high of 11.24 per cent last month.
The RBI's idiosyncratic focus on wholesale price inflation at the expense of retail inflation is a serious policy error.
The RBI had lowered policy rates by 0.50 per cent between January-March to prop up economic growth.
The market believes there will soon be another offer to buy the bonds.
The Producer Price Index will be better able to measure the average change over time in the sale prices of domestic goods and services, the Reserve Bank Governor said.
A Reuters poll forecast the wholesale price index , India's main inflation measure, rose an annual 7.6 per cent in November, up from 7.45 per cent in October.
If the pattern over the last three months is going to continue, the likelihood is that both indices will register inflation rates close to current levels over the next few months.
Retail inflation measured by the consumer price index has risen sharply across food and non-food constituents, including services, keeping inflation expectations high, the Reserve Bank of India said in its Second Quarter Review of Monetary Policy 2013-14.
To cut interest rates, the central bank head has to open up a debate on inflation target revision.
Retail inflation remained above the RBI's comfort level for the second consecutive month despite slipping slightly to 6.26 per cent in June while the factory output recorded a growth of 29.3 per cent in May, mainly on account of the base effect, the government data showed. The marginal slippage in the Consumer Price Index (CPI)-based inflation was noticed despite little firmness witnessed in the food inflation which inched up to 5.15 per cent in June from 5.01 per cent a month ago. Retail inflation based on Consumer Price Index (CPI) was 6.3 per cent in May 2021 and 6.23 per cent in June 2020.
After a delayed start, the monsoon is advancing steadily.
So, while it is great that India's numbers look relatively good, don't raise a cheer just yet, points out T N Ninan.
Clouding the inflation outlook is the recommendation of the 7th pay panel for an average 24 per cent pay hike for millions of its employees, which would lift demand-driven price pressures.
Nifty PSU Bank index gained 1% led by Allahabad Bank, Andhra Bank, Syndicate Bank and IDBI Bank
The Wholesale Price Index-based inflation was (-)4.54% in Sep.
RBI targets to keep inflation at 4 per cent, (+/- 2 per cent), and its rise beyond this comfort zone will put pressure on the central bank to hike rates.
As India looks to mend its Covid-battered economy, one thing that will grab the attention of all concerned is the path that both wholesale and retail inflation will follow. Even the Reserve Bank of India in its latest policy statement said, "Going forward, the inflation trajectory is likely to be shaped by uncertainties impinging on the upside and the downside.
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