India’s inflation rate in June accelerated to 9.44%, driven by high fuel and manufactured products’ prices as experts warned that prices will again surge in the coming weeks, when the knock-on effects of the recent hike in diesel prices cascade through the economy.
Inflation was 9.06% in May. More worryingly, the April inflation rate was revised significantly higher to 9.7% from 8.7% reported previously.
Finance minister Pranab Mukherjee expressed concern. at the development. “Inflation figures for June continue to be a matter of concern,” he said. “The government is working together with RBI to take appropriate steps to reduce inflation to more comfortable levels.”
The central bank, which will present quarterly monetary policy review on July 26, has raised the repo rate, the rate at which banks borrow from RBI, 10 times in the past 16 months in an attempt to cool prices.
A higher repo raises banks’ borrowing costs, which in turn would raise interest rate on final home, auto and corporate loans
“The latest inflation data offers no cheer... the central bank will have little choice but to hike the repo rate on July 26,” said Rajeev Malik, senior economist at broking and research firm CLSA.
The government had late last month raised diesel, kerosene prices and cooking gas prices.