India June Consumer Inflation Eases Before Rajan Review
Bloomberg News
India's consumer price gains slowed more than economists predicted, easing pressure on central bank Governor Raghuram Rajan to keep interest rates elevated as he fights Asia's fastest inflation.
Consumer prices in June rose 7.31 percent compared with 8.28 percent in May, the Statistics Ministry said in a statement. The median of 35 estimates in a Bloomberg News survey was for a 7.7 percent gain. The wholesale-price index increased 5.43 percent in June from a year earlier compared with 6.01 percent in May, the Commerce Ministry said earlier today.
Rajan signaled last month he'd ease monetary policy if consumer-price inflation was on pace to fall below 8 percent in January 2015, a glide path he adopted earlier this year. Finance Minister Arun Jaitley this month kept a target to lower the budget deficit to a seven-year low as a weak monsoon and rising fuel prices threaten to boost spending on subsidies.
'The risk to inflation remains because of a poor monsoon,' said Dharmakirti Joshi, chief economist at Crisil Ltd. in Mumbai. 'One data point in one month isn't enough for the central bank to start cutting rates.'
Modi Budget
The economy is on course for below-8 percent inflation this year, Rajan said on July 10. He kept interest rates unchanged last month, saying risks to the central bank's forecast of 8 percent consumer inflation by January 2015 are 'broadly balanced.' The next policy review is due Aug. 5.
In its first budget announced July 10, Prime Minister Narendra Modi's government made curbing inflation one of its top priorities and retained the previous government's fiscal deficit target of 4.1 percent of gross domestic product in the year through March 2015. Jaitley left revenue and expenditure targets largely similar to an interim budget in February.
Modi's government also said it would consult with the Reserve Bank of India on developing a 'modern monetary framework.' Such a structure must include a CPI target and operational autonomy for the central bank, the finance ministry said in a July 9 report.
The rupee weakened 0.2 percent to 60.0750 per dollar in Mumbai, the benchmark stock index fell 0.1 percent and the yield on the 10-year sovereign bond rose to 8.78 percent from 8.77 percent.
Food prices rose 8.14 percent in the WPI basket in June from a year earlier, while fuel and energy costs accelerated 9 percent, today's data showed. India's monsoon rainfall has been 43 percent below normal since June 1, the weather department said on July 11.
Industrial production gained the most in 19 months in May, rising 4.7 percent from a year earlier compared with 3.4 percent the previous month, government data showed July 11.
To contact the reporters on this story: Jeanette Rodrigues in New Delhi at jrodrigues26@bloomberg.net; Kartikay Mehrotra in New Delhi at kmehrotra2@bloomberg.net
To contact the editors responsible for this story: Daniel Ten Kate at dtenkate@bloomberg.net Sam Nagarajan
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