Indian policymakers must now shift their focus from battling inflation to reviving economic growth
ANNUAL inflation in India stayed stubbornly high at 9.11 per cent in November, down marginally from 9.73 per cent the month before, government data has showed.
The closely-watched Wholesale Price Index has been close to double figures for months, heaping pressure on the government and the central bank, which has aggressively raised interest rates to no avail.
Revised data for September showed inflation had broken into double figures, reaching 10 per cent.
The "sustained high level of inflation, which has been a major policy concern for us in the last two years, is now beginning to moderate", Finance Minister Pranab Mukherjee said.
Indian policymakers must now shift their focus from battling inflation to reviving economic growth, which fell to 6.9 per cent in the July-September quarter, he said.
D.K. Joshi, chief economist with Indian ratings firm Crisil, told 1 the fall in November inflation would not be enough for the central bank to start cutting lending rates to spur activity.
Policymakers from the Reserve Bank of India meet in financial hub Mumbai tomorrow (December 16), with analysts and economists expecting them to hold rates.
"People were expecting a sharper drop (in inflation). That hasn`t happened," he said. "My sense is that the weakening of the currency is now beginning to show in inflation. The pressure on inflation continues."
The rupee this week touched record lows against the dollar, as investors continue to opt for the safe-haven of the US currency amid uncertainty over the eurozone debt crisis.
The sharp fall in the local currency has made imports more costly, adding to inflation.
Business leaders have long been calling for a pause in interest rate rises due to concern about their impact on growth and investor confidence.
The director-general of trade body the Confederation of Indian Industry, Chandrajit Banerjee, welcomed the fall in inflation and said it should spur a softening in the central bank`s monetary policy stance.
"CII hopes that the RBI will now shift its focus to encouraging growth rather than controlling inflation, given that industrial production has now begun to contract and the investment scenario remains bleak," he said.
"The RBI should reduce interest rates to gradually reverse the impact of the 13 interest rate hikes it has undertaken over the last two years," he added, also calling for intervention to halt the fall of the rupee.
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