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India not alone in growth vs inflation policy tangle

business Updated: Jun 20, 2011 22:41 IST
Gaurav Choudhury

It is not India alone, where authorities are battling to keep growth on track while reining in prices. Governments and policymakers across the world are confronting the same challenge on the back of a sustained spike in global commodity prices.

Last week the central bank of China increased its reserve requirement ratio (RRR) by half a percentage point in its efforts to keep inflation in check.

China’s inflation accelerated in May at the fastest pace in almost three years, and industrial output grew more than forecast. At 5.5%, the annual gain in consumer prices matched the median estimate of economists.

"Inflation pressures remain large," Sheng Laiyun, a spokesman for China’s National Bureau of Statistics told a news conference after the release of the data. http://www.hindustantimes.com/images/HTPopups/200611/21_06_11-buss-25d.jpg

The economy, however, was on track for “stable and relatively fast growth.”

In April, the European Central Bank raised benchmark interest rate by a quarter percentage point, its first such move in three years, to control inflation. The ECB, which sets monetary policy for the 17-nation eurozone, raised its refinance rate to 1.3% from 1.0%. In the US, while energy prices have been the largest driver of inflation, food prices increased by 3.5% in May, and analysts expect it to break above 5.0% by year-end.

RBI has raised policy rates for the 10th time in 15 months to tame prices as wholesale price-based inflation surged to 9.06%, driven by high prices of food items and manufactured products.