| |
| |
 |
| |
|
| |
|
| |
|
NEW DELHI : India's annual inflation rate edged higher, official data on Friday showed, but analysts said this week's US interest rate cut raised chances the Indian central bank may follow suit.
Inflation accelerated to 3.83 percent for the week ended January 12 from 3.79 percent a week earlier, according to the wholesale price index, India's main cost-of-living monitor. It was 6.15 percent in the same year-ago period.
But inflation remained well below the Reserve Bank of India's ceiling of close to five percent for this fiscal year to March 31, 2008.
Analysts had expected the central bank -- wary about the impact of sharp rises in global oil and commodity prices -- to keep rates on hold this year.
But fears about a global slowdown that could hit Indian growth and the US Federal Reserve's massive 0.75 percentage point cut Tuesday in its key lending rate to 3.50 percent sparked hopes the bank would ease monetary policy soon.
India's benchmark 30-share Sensex index soared 6.62 percent or 1,139.92 points --- its biggest one-day point gain -- to 18,361.66 on hopes a rate cut could come as early as next Tuesday when the central bank meets.
The markets surged "on expectations the RBI (Reserve Bank of India) may lower interest rates," said Bhaskar Kapadia, a partner at Pyramid Securities.
India's government says it expects growth of close to nine percent for this year while the central bank is targeting 8.5 percent. But nine interest rate hikes since 2004 have slowed consumer demand and dampened expansion.
"The RBI has been focused on inflation for the last two years and looks set to give greater priority to its other objective -- growth," said HSBC economist Robert Prior-Wandesforde.
"We now expect two 25-basis-point rate cuts this year, possibly starting at next Tuesday's central bank meeting," he said.
But while the bank may soften its hawkish tone, it is likely take a wait and see stance, others said.
"It's too soon to assess the impact of the Fed rate cut in the context of volatile global financial markets" and a US stimulus plan of 150 billion dollars aimed at staving off recession in the world's largest economy, said Shubhada Rao, chief economist at India's Yes Bank.
Indian Finance Minister P. Chidambaram said keeping the inflation rate low was a priority for the government.
"We're comfortable with inflation below four percent and growth above eight percent," he was quoted as saying by the Press Trust of India at the World Economic Forum in Davos, Switzerland.
"I'll be in great trouble if inflation rises to six percent this year," he said. "Between inflation and growth, what hurts the poor most is the inflation. That's why we must keep inflation low."
The Congress-led government -- mindful rising prices can be political dynamite among the poor masses who helped propel it to power in 2004 -- insists price stability is a top priority. Elections are due in 16 months.
- AFP /ls
|
