By Cherian Thomas
Nov. 27 (Bloomberg) -- India’s inflation slowed to a six- month low, giving the central bank room to reduce borrowing costs to shore up investor confidence after yesterday’s terror attacks in Mumbai’s business district.
Wholesale prices rose 8.84 percent in the week to Nov. 15 from a year earlier after gaining 8.90 percent in the previous week, the commerce ministry said in New Delhi today. The median forecast of 11 analysts in a Bloomberg News survey was for a gain of 8.59 percent.
Inflation has almost halved from a 16-year high of 12.91 percent in August as a global recession drives down prices of oil and other commodities. A further cut in interest rates would help support interest among overseas investors, shaken by yesterday’s terror onslaught targeted at foreigners. As many as 101 people have been killed in the attacks.
“Monetary policy will be in a softening mode until the middle of next year,” said Mridul Saggar, chief economist at Kotak Securities Ltd. in Mumbai. “Maintaining that stance will help prop up investor confidence” after the bomb attacks.
Indian commandos are still battling to free hostages held by gunmen at two luxury hotels in Mumbai. Militants armed with grenades and rifles stormed into the Taj Mahal Palace and Tower hotel and the Trident Oberoi complex late yesterday, saying they were targeting Americans and Britons, according to witnesses.
Markets Closed
Six foreigners, 14 policemen, including the head of India’s anti-terrorism unit, were among those who are killed, according to police.
Targeting foreign nationals at key tourist hotels and restaurants adds a new dimension to a wave of bombings in India this year that has killed more than 300 people.
India’s stock, bond, currency and money markets are shut as the government ordered residents of Mumbai to stay at home.
The central bank has reduced its benchmark lending rate twice in the past five weeks, lowering it to 7.5 percent from a seven-year high of 9 percent. It also pared the amount that lenders must set aside as cash reserves and in government bonds to cover deposits by 3.5 percentage points and 1 percentage point respectively.
The Reserve Bank of India has scope to cut borrowing costs further as inflation approaches a level “we can live with,” Finance Minister Palaniappan Chidambaram said in a Nov. 18 interview. Growth in India’s $1.2 trillion economy is weakening as a simultaneous recession in the U.S., Europe and Japan crimp demand for the nation’s exports.
India’s economy may slow to 7.5 percent in the year ending March 31 after expanding 9 percent or more annually in the previous three years, according to the central bank.
India is scheduled to announce the economic growth rate for the July-September quarter tomorrow.
Today’s inflation rate may be revised in two months, after the government receives additional price data. The commerce ministry increased the inflation rate for the week ended Sept. 20 to 12.13 percent from 11.99 percent.
To contact the reporter on this story: Cherian Thomas in New Delhi at Cthomas1@bloomberg.net.
Posts
No comments:
Post a Comment