Growth outlook darkens; food inflation offers no respite at 10.60%

India's food price index rose 10.60 percent and the fuel price index climbed 15.17 percent in the year to October 8, government data on Thursday showed. In the previous week, annual food and fuel inflation stood at 9.32 percent and 15.10 percent, respectively.

Even though there are expectations for some respite in the hawkish RBI's fight against inflation, it seems like the slowing economic growth and elevated inflationary pressure will stretch well into the next year.

"The sentiment is pretty negative," said Bhupesh Bhameta at Quant Capital. "What is happening on the global front now impacts India's export competitiveness and investment."

[caption id="attachment_112413" align="alignleft" width="380" caption="The primary articles index was up 11.18 percent, compared with an annual rise of 10.60 percent a week earlier. AFP"][/caption]

The primary articles index was up 11.18 percent, compared with an annual rise of 10.60 percent a week earlier.

The RBI has raised interest rates a dozen times since March 2010, a campaign that has done more to slow growth than contain inflation, which remains at more than twice the bank's comfort level.

More from Economy

Growth in India will be slower than government projections, Finance Minister Pranab Mukherjee said on Wednesday, highlighting how high inflation, rising interest rates and global financial turbulence threaten India's growth momentum.

But Mukherjee hinted India may continue to tighten monetary policy, in contrast to most other major emerging economies, to keep stubbornly high inflation in check despite fears of a broader economic slowdown.

A jump in fuel and power prices drove the wholesale price index up 9.72 percent in September versus a year earlier, government data showed last Friday, bracing the market for another possible interest rate rise.

Reuters