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Home » Finance Current Affairs » India Wholesale Prices Rise for First Time in 14 Weeks

India Wholesale Prices Rise for First Time in 14 Weeks

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NEW DELHI -- Wholesale prices in India rose for the first time in 14 weeks and analysts expect the inflation to outpace the Reserve Bank of India's forecast by the end of the current financial year in March.

However, an immediate hike in interest rates to tame the prices is unlikely as the central bank is expected to wait for stronger signs of economic growth before exiting its yearlong easy monetary stance.

The wholesale price index - India's main gauge of inflationary trends - rose 0.12% in the week ended Sept. 5 from a year earlier, according to provisional data issued Thursday by the Ministry of Commerce and Industry.

The median forecast in a Dow Jones Newswires poll of five economists was for a 0.04% decline. The index had fallen 0.12% in the previous week.

The year-on-year drops in the index in earlier weeks reflect more of a surge in energy prices last year - which resulted in a high comparison base - rather than a weak domestic demand this year.

India's inflation rate was at its highest level in over a decade last year, before it started decelerating gradually from September 2008.

The index has risen steadily week on week since the end of March, with the rise in food prices particularly sharp. Potato prices have nearly doubled since the beginning of the current financial year in April, while sugar prices have soared 28%.

"Inflation is increasingly emerging as a concern," Yes Bank said in a research note. "We expect the central bank to revise its inflation target upwards in the October policy and hold our end-March WPI inflation estimate at 7.0%-7.5%," the bank said.

The Reserve Bank of India expects inflation at around 5% by the end of the financial year.

For the week ended Sept. 5, the wholesale price index was up 0.4% from the previous week at 242.0. Primary articles were up 1.3% from a week earlier, while the prices of manufactured goods were little changed.

The Reserve Bank of India won't tighten its monetary policy unless an economic recovery takes hold, but it may have to exit the easy stance before other nations, Gov. Duvvuri Subbarao said earlier this week.

Since the global financial crisis erupted last year, the central bank has lowered its short-term lending rate by 4.25 percentage points to 4.75% and borrowing rate by 2.75 percentage points to 3.25%.



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