NEW DELHI: British banking major Barclays has projected inflation in India to surge further in the wake of rising food prices coupled with higher oil prices among other developments that could fuel the price spiral.
In its report titled ‘Caging the beast’, Barclays Wealth Research said: “Upward pressure on inflation is likely to continue throughout the year, largely due to rising food prices and elevated oil prices...the Indian government recently raised retail fuel prices by around 10 per cent, and we expect there is more to come”, while pointing out that the surge in the inflation rate based on the wholesale price index (WPI) was largely on account rising food and oil prices. , Barclays said in the report.
Painting a darker scenario as compared to projections by other agencies and think-tanks, the global investment banker had earlier said: “We believe WPI inflation will remain in double-digit territory until May 2009. We expect WPI inflation of 17 per cent by September 2008”.
The banking major sought to argue that the number of measures taken till now to hold the price line have not been enough. For instance, while the export of certain items such as pulses, wheat, rice, cement and some steel products were banned, the Reserve Bank of India hiked the repo rate as well as the cash reserve ratio to nine per cent. Making out a case for more steps in tame inflation, Barclays analyst Diogo Santos said: “But with real rates still very low, further action is needed in order to curb price pressures”.
At the same time, the banking major viewed that the private consumption level was likely to remain fairly strong, mainly on account of an increase in wages and salaries.
“After several years of strong growth of close to 9 per cent, this year the rate would moderate to around 8 per cent level and stay near there in 2009,” the Barclays’ report said while noting that a slowdown would set in largely as a result of the tight monetary policy and also owing to a generalised slowdown in other economies globally.
On the country’s stock market, Barclays viewed that while growth was strong until this year, investors now would have to learn to live with risk and volatility. “Equities have fallen but are not necessarily cheap. Given the macro picture, we may see further losses although the market should stabilise and pick up as risk aversion decreases”-Hindu
In its report titled ‘Caging the beast’, Barclays Wealth Research said: “Upward pressure on inflation is likely to continue throughout the year, largely due to rising food prices and elevated oil prices...the Indian government recently raised retail fuel prices by around 10 per cent, and we expect there is more to come”, while pointing out that the surge in the inflation rate based on the wholesale price index (WPI) was largely on account rising food and oil prices. , Barclays said in the report.
Painting a darker scenario as compared to projections by other agencies and think-tanks, the global investment banker had earlier said: “We believe WPI inflation will remain in double-digit territory until May 2009. We expect WPI inflation of 17 per cent by September 2008”.
The banking major sought to argue that the number of measures taken till now to hold the price line have not been enough. For instance, while the export of certain items such as pulses, wheat, rice, cement and some steel products were banned, the Reserve Bank of India hiked the repo rate as well as the cash reserve ratio to nine per cent. Making out a case for more steps in tame inflation, Barclays analyst Diogo Santos said: “But with real rates still very low, further action is needed in order to curb price pressures”.
At the same time, the banking major viewed that the private consumption level was likely to remain fairly strong, mainly on account of an increase in wages and salaries.
“After several years of strong growth of close to 9 per cent, this year the rate would moderate to around 8 per cent level and stay near there in 2009,” the Barclays’ report said while noting that a slowdown would set in largely as a result of the tight monetary policy and also owing to a generalised slowdown in other economies globally.
On the country’s stock market, Barclays viewed that while growth was strong until this year, investors now would have to learn to live with risk and volatility. “Equities have fallen but are not necessarily cheap. Given the macro picture, we may see further losses although the market should stabilise and pick up as risk aversion decreases”-Hindu
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