The Reserve Bank of India's (RBI) monthly bulletin, released on November 20, said inflation can undermine the prospects if real economy, especially industry and exports if allowed to run unchecked.
"Inflation is already biting into urban consumption demand and corporates’ earnings and capex. If allowed to run unchecked, it can undermine the prospects of the real economy, especially industry and exports," the bulletin said.
The monthly State of the Economy article includes Deputy Governor Michael Patra - one of the three RBI representatives on the Monetary Policy Committee (MPC) - as one of its co-authors. The views expressed in the article do not reflect the central bank's official stance, the RBI said in a press release.
The October CPI inflation reading turned out to be a sticker shock after the wake-up call of September’s spike, reinforcing the RBI’s warnings on complacency due to sub-target outcomes for July and August, the bulletin added.
The bulletin added that there are early signs of second order effects or spill overs of high primary food prices - following the surge in prices of edible oils, inflation in respect of processed food prices is starting to see an uptick.
India's retail inflation rose to a 14-month high of 6.2 percent in October compared with 5.5 percent in the previous month, as food inflation galloped on the back of rising vegetable prices.
The October reading, was above the Moneycontrol poll median of 5.9 percent from 15 forecasts, and breached RBI's upper band target of 6 percent for the first time in over a year, raising fears that the Reserve Bank of India may hold rates for the eleventh consecutive time at its meeting in December.
(This is a developing story)
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