The benchmark wholesale-price index rose 9.73 percent in October from a year earlier, the commerce ministry said in a statement in New Delhi today. That compares with a 9.72 percent jump in September and the median forecast of 9.65 percent in a Bloomberg News survey of 19 economists.
Asian nations from Indonesia to South Korea are either cutting rates or keeping them on hold to protect expansion as Europe’s debt crisis threatens to trigger a global slump. India’s central bank last month signaled it’s nearing the end of monetary tightening, provided inflation slows, after it raised rates for the 13th time since mid-March 2010.
“Prices are not coming off,” said Madan Sabnavis, chief economist at Mumbai-based ratings company Credit Analysis & Research Ltd. “The RBI will have to probably revisit its guidance if inflation remains elevated.”
The BSE India Sensitive Index gained 0.6 percent at 12:56 p.m. in Mumbai. The yield on the 8.79 percent government security due November 2021 rose four basis points, or 0.04 percentage point, to 8.98 percent. The rupee was little changed at 50.09 per dollar.
The currency has tumbled more than 10 percent this year, a decline the central bank has said risks stoking inflation.
Indian Oil Corp., the nation’s biggest refiner, increased local gasoline prices on Nov. 4 for the third time in six months to stem losses, saying the rupee’s decline boosted costs.
The Reserve Bank of India on Oct. 25 said that its monetary tightening will help curb inflation and that the likelihood of a rate action in the December policy meeting is “relatively low.”
India’s inflation will start to decline from December and ease to 7 percent by March before moderating further in the first half of the next fiscal year starting April 1, according to the central bank. Beyond December, “if the inflation trajectory conforms to projections, further rate hikes may not be warranted,” the Reserve Bank said.
The central bank’s guidance on rates is “not a commitment” and is based on a “scenario materalizing and there are many risks to that scenario materializing,” central bank Deputy Governor Subir Gokarn said on Nov. 11.
The Reserve Bank predicted India’s economy will expand 7.6 percent in the year ending March 31, lower than the 8 percent it estimated earlier.
Governor Duvvuri Subbarao has increased the central bank’s repurchase rate by 375 basis points since the start of 2010. That’s the fastest round of increases since the monetary authority was established in 1935, Bloomberg data show. The repurchase rate is 8.5 percent.
The rate rises have started to hurt consumer demand. India’s industrial production grew 1.9 percent in September from a year earlier, the slowest pace in two years. India’s automakers on Oct. 10 cut their car sales growth forecast for a second time this year as companies including Honda Motor Co. and Ford Motor Co. faced lower demand.
Subbarao said last month that the central bank gave the guidance on rates to help boost investment.
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