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Rupee fall, crude spike add challenges to inflation mgmt: RBI

Last Updated: Monday, July 29, 2013 - 22:45

Mumbai: Even though wholesale price index has come down significantly, RBI Monday said the steady fall of rupee and pick-up in commodity prices pose risks.

"The recent currency depreciation and upward pressure on fuel prices due to geo-political uncertainties pose upside risks to inflation," the Reserve Bank said in its macroeconomic and monetary developments report released on the eve of the policy announcement.

The rupee has depreciated by nearly 11 percent in the current fiscal, forcing the RBI to take some surprise measures, while on the commodity front, heightened tension in West Asia has resulted in some pressure on crude prices.

Headline inflation based on wholesale prices increased marginally to 4.86 percent in June, which many still consider as being in the central bank's comfort zone of 5 percent.

However, the consumer price inflation continues to hover around the double-digit for 15 months in a row. "Near double-digit consumer price inflation also remains a major concern," the RBI report said.

It said there is a wide gap between the two inflation indices -- by wholesale price and by consumer price -- due to trade and transport margins and taxes across the states.

It can be noted that the risks to inflation and its stubbornness resulted in a series of 13 consecutive rate hikes by the Reserve Bank over 18 months till end October 2011, after which reviving growth became the agenda.


First Published: Monday, July 29, 2013 - 22:45
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