Subbarao Says India’s Inflation Rate Is Above Tolerance Level By Anoop Agrawal and Kartik Goyal on June 19, 2012
Indian inflation exceeds acceptable levels and restraining it may require sacrificing economic growth, central bank Governor Duvvuri Subbarao said.
“Headline inflation has come down, core inflation has come down to below 5 percent, but WPI inflation is still above our tolerance level at 7.5 percent,” Subbarao said in a speech in Mumbai yesterday, referring to India’s benchmark wholesale-price index. “Consumer-price inflation is running above 10 percent. That is quite disturbing.”
The Reserve Bank of India unexpectedly left interest rates unchanged on June 18 as price pressures narrow scope to bolster the weakest growth in almost a decade. Curbing the nation’s fiscal deficit and the success of the monsoon are among the keys to controlling inflation, Subbarao said.
“India is flirting with stagflation and needs a dose of supply-side reforms to improve medium-term growth potential,” said Prasanna Ananthasubramanian, Mumbai-based chief economist at ICICI Securities Primary Dealership Ltd. “However, the political realities are such that the chances of structural reforms and fiscal consolidation are uncertain.”
Price increases have been stoked in part by costlier imports following a near 20 percent slump in the rupee against the dollar in the past year. The currency tumbled as growth deteriorated and Europe’s debt crisis sapped demand for emerging-market assets.
At http://www.jsmineset.com/2012/06/19/in-the-news-today-1222/
My comment: Listen to the Indian Finance Minister. Sell your gold and convert to Indian currency ... while at the same time India is itself buying billions of dollars worth of what the Indian Finance Minister called a "dead asset."
