The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has raised the benchmark repo rate by 140 basis points since May to 5.4%, including 50 basis points last month, in a bid to to curb consumer demand.
Annual inflation based on the consumer price index in August was higher than expected, according to data released by the national statistics office, compared to a forecast of 6.9% in a Reuters poll of India. economists, and above July’s 6.71%.
Food inflation, which accounts for almost 40% of the CPI basket, rose to 7.62% year-on-year in August, compared to a revision of 6.69% in July.
The government has imposed export restrictions on wheat, sugar and rice to cool local prices, as it fears that lack of rainfall in parts of the country could drive up food prices.
The CPM will hold its next monetary policy meeting on September 30, and it is widely expected to raise the repurchase rate by 25-50 basis points, according to economists.
RBI Governor Shaktikanta Das said earlier this month that retail inflation had peaked and was expected to moderate to around 5% by the April-June quarter next year, citing a fall in international prices for crude oil and other raw materials.
Rising food and fuel prices have hit poor households hard.
“We have reduced our expenditure on vegetables,” said Puspanjali Sahu, a resident of the eastern Indian city of Bhubaneswar. “We don’t go out to restaurants, we don’t watch movies in cinemas.”