- POSTED: 16 Sep 2013 16:42
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India's inflation rose unexpectedly in August to a six-month-high, data showed on Monday, adding to challenges confronting the new central bank chief, who is already grappling with a slowing economy and a weak currency.
NEW DELHI: India's inflation rose unexpectedly in August to a six-month-high, data showed on Monday, adding to challenges confronting the new central bank chief, who is already grappling with a slowing economy and a weak currency.
The higher-than-expected inflation is the last piece of domestic data before Reserve Bank of India governor Raghuram Rajan, a former IMF chief economist, chairs his first monetary policy-setting meeting on Friday.
The annual rate of inflation -- based on the widely watched Wholesale Price Index -- hit 6.10 per cent in August from the same month a year ago and was up from 5.79 per cent in July.
The level surprised analysts who had expected inflation to be broadly in line with July's level.
"Food and fuel price inflation will continue to drive the headline (number)," said Glenn Levine, economist at Moody's research arm, ahead of the data.
Fruit and vegetable prices jumped 13 per cent in August from a year earlier while the cost of fish rose 22 per cent.
The scandal-tainted Congress-led government of Prime Minister Manmohan Singh is anxious to tame inflation and revive the economy as it seeks a third term in office with elections due by May 2014.
But the weak rupee and rising prices have curbed the central bank's room to cut rates to stimulate an economy that grew five per cent last year, its slowest pace in a decade.
The central bank cut rates three times in 2013 following an aggressive hiking spree but was forced to tighten monetary policy to try to stem the rupee's fall.
While still down around 12 per cent this year, the rupee has rallied on the back of a string of measures announced by Rajan since he took over at the bank on September 4.
The measures have been mostly aimed at bolstering the currency and liberalising financial markets to encourage foreign fund inflows.
Business leaders have been clamouring for lower interest rates to spur the economy.
But economists say rate cuts right now could undermine the rupee, push up import costs and widen India's gaping current account deficit -- the broadest measure of trade -- which the bank calls the "biggest risk" to the economy.