India's non-food manufacturing inflation is picking up, a top government adviser said on Friday, in a sign broader inflation is becoming demand-driven, keeping pressure on the central bank to tighten monetary policy. The Reserve Bank of India (RBI), which is widely expected to raise key rates by 25 basis points on July 27, closely monitors movement in prices of non-food manufacturing items, which make up a little over half of the wholesale price index.
"Food inflation continues to slow down and non-food inflation is on a slow pick-up," said Kaushik Basu, chief economic adviser at the finance ministry. Non-food manufacturing inflation in June was 8.6 percent, higher than 6.6 percent the previous month, but Basu said food inflation would likely ease in the next two weeks.
The wholesale price index, India's main inflation gauge, stood at 10.55 percent in June, holding in double digits for the fifth straight month, after hitting 11.23 percent in April, the highest since September 2008. The RBI surprised markets earlier this month by lifting policy rates by a quarter point, its third hike this year, citing a rapid pick-up in non-food prices.
Separately, India's top bureaucrat, Cabinet Secretary K.M. Chandrasekhar, on Friday said the bank would consider both inflation and money supply figures for its policy review. "It is up to them (the RBI) to look at what is the effect of money supply on prices," said Chandrasekhar.
The volume of money in circulation is picking up. India's M3 money supply rose an annual 15.3 percent as on July 2, faster than 14.5 percent on June 18, the RBI said on Friday. Also on Friday, the RBI India extended an adjustment facility to ease tight liquidity, which had been due to expire the same day.
Comments
Comments are closed.