India faces inflation risks

18 March 2011

India is readying itself for inflation risks as oil costs increase and consumer demand strengthens.

The Reserve Bank of India (RBI) has elevated its inflation forecast as it raised the benchmark repurchase rate by a quarter-point to reach 6.75 per cent, Bloomberg reports.

Shanto Ghosh, an economist at Deloitte Touche Tohmatsu India, said: "The pressures to manage inflation, out of the evolving domestic and global situations, have only intensified."

An economist at HSBC in Singapore noted the RBI is currently concerned with the inflation outlook, observing these reservations are particularly prevalent due to increased food prices, demand-led inflation pressures and escalating international commodity prices.

The news provider noted that India imports three-quarters of its energy requirements - and political unrest in the Middle East has caused the commodity to surge 25 per cent in the last year.

Failure to improve a tattered infrastructure in India is another factor increasing inflation risks in the country, the Wall Street Journal recently reported.

By Gary Cooper

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