In addition, the sharp slide in the rupee, which has fallen nearly 13% since May, will fan inflation further by making imported goods such as crude oil costlier.
“With the weakening of the rupee, inflation in imported goods may be a concern going ahead. Already, prices of petroleum products have seen an upward revision,” said Naina Lal Kidwai, president of industry chamber Ficci.
Consumer price index (CPI)-based inflation — a more realistic index because it measures shop-end prices — grew 9.87% in June from 9.31% in the previous month on costlier vegetables and food items.
“As long as CPI inflation remains close to double digits and the balance of payment is at risk, we expect the RBI to remain on hold,” said Sonal Varma, economist at research firm Nomura.
India’s factory output — the closest approximation to measure business and investment activity — contracted 1.6% in May, while exports contracted by 4.6% in June on shrinking shipment orders from Europe that is hit by sputtering growth.