June 22 (Bloomberg) -- India's inflation rate slowed to a 13-month low in the second week of June as prices of fruits, lentils and cereals declined, making it easier for the central bank to end its 2 1/2-year run of interest-rate increases.
Wholesale prices rose 4.28 percent in the week ended June 9 from a year ago, slowing from 4.8 percent the previous week, the Ministry of Commerce & Industry said in New Delhi today. Analysts forecast inflation at 4.45 percent.
June 22 (Bloomberg) -- India's inflation rate slowed to a 13-month low in the second week of June as prices of fruits, lentils and cereals declined, making it easier for the central bank to end its 2 1/2-year run of interest-rate increases.
Wholesale prices rose 4.28 percent in the week ended June 9 from a year ago, slowing from 4.8 percent the previous week, the Ministry of Commerce & Industry said in New Delhi today. Analysts forecast inflation at 4.45 percent.
Finance Minister Palaniappan Chidambaram wants to contain inflation without hurting economic growth, which he says is the antidote to poverty. India's central bank raised benchmark rates nine times since October 2004 to damp consumer demand and may now rely on the delayed effect of raising borrowing costs to a five-year high to rein in inflation.
``The decline in inflation definitely takes away a lot of discomfort at the government's level and obviously reduces pressure for immediate monetary policy action,'' said Indranil Pan, chief economist at Kotak Mahindra Bank Ltd. in Mumbai.
A pause in the Reserve Bank of India's policy of raising interest rates will help bolster economic growth. India's industrial production grew 13.6 percent in April, the government said on June 12. India's economy has averaged 8.6 percent growth since 2003, the second-fastest after China among the major economies, causing demand for manufactured and farm goods to outstrip supply and stoking prices.
The finance minister said it was too early to say whether inflation has been contained.
Too Early
``The monetary measures have had an impact but it is too early to reach any conclusion,'' Chidambaram said. ``We need to watch the situation over the next four-five weeks. I maintain that we must strike a balance between growth and inflation.''
The Reserve Bank of India will announce its next monetary policy on July 31. The central bank can announce rate changes before the scheduled monetary policy review, as it has done three times since December.
To combat inflation, the Reserve Bank has also allowed the rupee to gain to near a nine-year high to make imports cheaper. It has slowed dollar purchases on concern rupee funds injected from the exercise will stoke inflation.
Inflation is at its lowest since the week ending April 29 last year, when the rate was at 3.9 percent, according to data compiled by Bloomberg. It accelerated to 4.37 percent in the following week.
`Softening of Inflation'
``The Reserve Bank of India will definitely be comfortable with the softening of inflation,'' said Prasanna Ananthasubramaniam, a fixed-income analyst at ICICI Securities Ltd. ``The way inflation has behaved is in line with what the Reserve Bank has been saying.''
India's 10-year bonds advanced after inflation slowed more than expected. The yield on the 7.49 percent bond maturing in April 2017 fell 5 basis points this week to 8.23 percent at the 5:30 p.m. close in Mumbai, according to the central bank's trading system. The price rose 0.35, or 35 paise per 100-rupee face amount, to 95.06.
The yield, which moves inversely to the price, dropped to as low as 8.19 percent from 8.22 percent immediately after the report was released. A basis point is 0.01 percentage point.
To check prices of food grains, which have risen at almost twice the pace of manufactured product prices in the past year, the government removed the import duty on lentils in June 2006, and on wheat in September.
The government today revised the inflation rate for the week ended April 14 to 6.34 percent from 6.09 percent. The government revises the inflation rate after a delay of two months on additional price data. Week Ended Week Ended Percentage
June 9 June 2 Change
Primary articles 220.1 220.4 -0.1
Fuel, power 322.0 321.9 unchanged
Manufactured products 184.4 184.4 unchanged
Food articles 219.6 220.3 -0.3
Food products 183.4 183.2 0.1
Cement 212.3 212.4 unchanged
Edible oils 167.5 166.3 0.7
Fruits 261.9 265.4 -1.3
Lentils 246.6 248.5 -0.8
Cereals 203.8 205.0 -0.6
Total 211.8 211.9 -0.05
rates nine times since October 2004 to damp consumer demand and may now rely on the delayed effect of raising borrowing costs to a five-year high to rein in inflation.
``The decline in inflation definitely takes away a lot of discomfort at the government's level and obviously reduces pressure for immediate monetary policy action,'' said Indranil Pan, chief economist at Kotak Mahindra Bank Ltd. in Mumbai.
A pause in the Reserve Bank of India's policy of raising interest rates will help bolster economic growth. India's industrial production grew 13.6 percent in April, the government said on June 12. India's economy has averaged 8.6 percent growth since 2003, the second-fastest after China among the major economies, causing demand for manufactured and farm goods to outstrip supply and stoking prices.
The finance minister said it was too early to say whether inflation has been contained.
Too Early
``The monetary measures have had an impact but it is too early to reach any conclusion,'' Chidambaram said. ``We need to watch the situation over the next four-five weeks. I maintain that we must strike a balance between growth and inflation.''
The Reserve Bank of India will announce its next monetary policy on July 31. The central bank can announce rate changes before the scheduled monetary policy review, as it has done three times since December.
To combat inflation, the Reserve Bank has also allowed the rupee to gain to near a nine-year high to make imports cheaper. It has slowed dollar purchases on concern rupee funds injected from the exercise will stoke inflation.
Inflation is at its lowest since the week ending April 29 last year, when the rate was at 3.9 percent, according to data compiled by Bloomberg. It accelerated to 4.37 percent in the following week.
`Softening of Inflation'
``The Reserve Bank of India will definitely be comfortable with the softening of inflation,'' said Prasanna Ananthasubramaniam, a fixed-income analyst at ICICI Securities Ltd. ``The way inflation has behaved is in line with what the Reserve Bank has been saying.''
India's 10-year bonds advanced after inflation slowed more than expected. The yield on the 7.49 percent bond maturing in April 2017 fell 5 basis points this week to 8.23 percent at the 5:30 p.m. close in Mumbai, according to the central bank's trading system. The price rose 0.35, or 35 paise per 100-rupee face amount, to 95.06.
The yield, which moves inversely to the price, dropped to as low as 8.19 percent from 8.22 percent immediately after the report was released. A basis point is 0.01 percentage point.
To check prices of food grains, which have risen at almost twice the pace of manufactured product prices in the past year, the government removed the import duty on lentils in June 2006, and on wheat in September.
The government today revised the inflation rate for the week ended April 14 to 6.34 percent from 6.09 percent. The government revises the inflation rate after a delay of two months on additional price data. Week Ended Week Ended Percentage
June 9 June 2 Change
Primary articles 220.1 220.4 -0.1
Fuel, power 322.0 321.9 unchanged
Manufactured products 184.4 184.4 unchanged
Food articles 219.6 220.3 -0.3
Food products 183.4 183.2 0.1
Cement 212.3 212.4 unchanged
Edible oils 167.5 166.3 0.7
Fruits 261.9 265.4 -1.3
Lentils 246.6 248.5 -0.8
Cereals 203.8 205.0 -0.6
Total 211.8 211.9 -0.05
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