India's inflation rises as factory output quickens

GMT 16:20 2015 Friday ,12 June

Arab Today, arab today India's inflation rises as factory output quickens

Production at India's factories
Mumbai - AFP

India's inflation rate rose in line with analysts' expectations as industrial output quickened, official figures showed Friday, the latest data to suggest government reforms were helping to revive economic activity.

Consumer prices increased to 5.01 percent in May from a year earlier and up from a four-month low of 4.87 percent in April. A poll of analysts by Bloomberg had predicted a 5 percent rise.

Analysts said the inflation rise would reduce the chance of a fourth interest-rate cut this year, until at least the end of monsoon rains around September.

Reserve Bank of India governor Raghuram Rajan cut the central bank's key borrowing rate by 25 basis points last week, resisting calls for a bigger snip until the monsoon had passed.

India's inflation rate is expected to rise during the three-month summer monsoon, which is just starting, if rains are weak as predicted.

"If the RBI moves on rates again, it will be in October," Ashutosh Datar, an economist with IIFL Institutional Equities, told AFP on Friday.

Inflation has cooled in recent months thanks largely to plummeting global oil prices, leading India's central bank to slice 75-basis points off the benchmark repo rate.

A recent recovery in crude prices has raised concerns of higher inflation in India, which is heavily dependent on imported oil. Inflation is presently well within the RBI's target range of below six percent.

Prime Minister Narendra Modi swept to power little over a year ago, pledging to stimulate the economy and boost foreign direct investment. In May, India posted growth of 7.5 percent for the first three months of the year, overtaking China.

On Friday, data showed that production at India's factories, mines and utilities, soared to 4.1 percent last month, well ahead of analysts' predictions of just 1.5 percent.


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