New Delhi: India's food inflation accelerated to a three-month high and exports grew at the fastest pace in at least 16 years, maintaining pressure on the central bank to raise interest rates amid the risk of a global downturn.
An index measuring wholesale prices of farm products rose 9.9 per cent in the week ended July 30 from a year earlier, the most since April 23, according to the commerce ministry. Merchandise shipments jumped 81.8 per cent to $29.3 billion (Dh107.62 billion) in July, Commerce Secretary Rahul Khullar said in New Delhi yesterday. That's the biggest increase since April 1995, Bloomberg data show.
Reserve Bank of India Governor Duvvuri Subbarao, whose term this week was extended by two years, has to weigh the risks to economic growth posed by Europe's sovereign-debt crisis as he tightens monetary policy to slow inflation. Exports may "slip" from next month because of weak overseas demand, Khullar said.
"Inflationary pressures are definitely there and there is a case for increasing rates unless the global situation deteriorates dramatically," said Anubhuti Sahay, a Mumbai-based analyst at Standard Chartered. She expects the central bank to boost its repurchase rate by half a percentage point to 8.5 per cent by the end of December.
Asia's benchmark stock index pared its seventh loss in eight days as concern Europe will fail to contain its debt crisis was tempered by higher profits from the US to Japan and Australia.
Growth: exports jump 81.8%
India's exports in July jumped by a record 81.8 per cent year-on-year to $29.3 billion due to the improved performance of sectors such as engineering, and gems and jewellery, a Commerce Ministry official said yesterday.
The high rate of growth was, however, unlikely to be sustained due to the uncertainties in the US and European markets, Commerce Secretary Rahul Khullar was quoted as saying by Doordarshan television channel.
— Bloomberg
