Pranab Mukherjee: The Indian Government is working with the central bank to curb inflation
INDIA’S inflation quickened to a 13-month peak of nearly 10 per cent in August, according to the official data. The central bank is under pressure to hike the interest rates again.
Annual inflation jumped by over half a percentage point to 9.78 per cent in August from July`s 9.22 per cent, according to the figures, which came days after data showed that industrial output grew at its slowest pace in nearly two years.
"It is more bad news, inflation has gone up - it is perilously close to double-digits," Finance Minister Pranab Mukherjee said.
"This is a time of stress not only in India but all over the world. We shall have to maintain our nerve," he added.
Inflation is one of the biggest headaches for the Congress-led government, which is also reeling from a spate of corruption scandals. The price gains have hit India`s impoverished millions who are the Congress party`s key supporters.
The official August inflation figures, which exceeded market forecasts of 9.6 per cent were fuelled by price rises in food, fuel and manufactured goods.
India`s hawkish central bankers will hold a policy-setting meeting on Friday (September 16) and most economists are betting on another quarter-point interest rate hike.
But government policymakers have been voicing doubts about further monetary tightening as the economy loses pace.
"We have to seriously look at whether we should stick to the tightening policy or begin to think out of the box," chief economic advisor in the finance ministry Kaushik Basu said.
Business groups are complaining that the rate rises are choking economic growth while failing to check inflation.
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