Business | Economy

India's inflation rate 'underestimated'

India's inflation rate, which is at its highest in three and a half years, is totally unacceptable and the official data underestimate the actual rate of inflation, its central bank chief said on Tuesday.

  • Reuters
  • Published: 00:15 May 21, 2008
  • Gulf News

Singapore: India's inflation rate, which is at its highest in three and a half years, is totally unacceptable and the official data underestimate the actual rate of inflation, its central bank chief said on Tuesday.

The 10-year benchmark bond yield briefly rose three basis points to a three-week high of 7.97 per cent after the comments as traders speculated the central bank would not relax its inflation guard any time soon to stimulate slowing growth.

India's wholesale price index rose an annual 7.83 per cent in the week ended May 3, its highest since November 2004, and economists say the actual rate may be closer to nine per cent due to sharp upward revisions in provisional readings recently.

Underlying pressures

"Yes, it underestimates the inflation number. There are underlying inflation pressures," Reserve Bank of India Governor Yaga Venugopal Reddy said in response to a question on whether oil subsidies depress the actual inflation figure. "The current high level of inflation is totally unacceptable, especially in terms of impact on inflationary expectations."

The Indian government sets retail prices of petrol and diesel and has raised them only once this year, by 3.3 to 4.6 per cent in February, even though international crude prices have risen about 27 per cent since the start of the year.

The central bank often says pass-through of high global oil prices is incomplete, complicating policy making.

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