Indian inflation accelerated more than economists estimated in July as a plunge in the rupee stoked import costs, adding pressure on the central bank to stay focused on steadying the currency.
The wholesale-price index rose 5.79 per cent from a year earlier, compared with June's 4.86 per cent climb, the Commerce Ministry said in New Delhi on Wednesday. The median estimate in a Bloomberg News survey of 34 analysts was for a 5 per cent gain.
The Reserve Bank of India raised two interest rates last month and the government this week stepped up efforts to curb a record current-account deficit and garner capital inflows, striving to stem the rupee's 10.5 per cent drop versus the dollar in 2013. Costlier credit imperils economic expansion and poses a policy challenge for incoming central bank head Raghuram Rajan, according to Credit Analysis & Research in Mumbai.
"It's a tough situation for which there are no quick fixes," Madan Sabnavis, chief economist at Credit Analysis & Research, said before the release. "The priority now is to stabilize the rupee and if the steps taken stay for longer, you can expect a delayed growth recovery."
The currency, which touched an all-time low on August 6, weakened 0.5 per cent to 61.475 per dollar as Wednesday afternoon in Mumbai.
The current-account gap, stoked by gold and crude oil imports and subdued overseas sales, and the prospect of reduced US Federal Reserve monetary stimulus have weighed on the rupee.
Indian Oil, the nation's biggest refiner, raised gasoline prices in June and July. Every 10 per cent decline in the rupee adds as much as 80 basis points to wholesale-price inflation, Nomura Holdings estimates show.
Consumer prices rose 9.64 per cent in July from a year earlier, a report showed Aug. 12. That is the second fastest in the Group of 20 major economies, according to data compiled by Bloomberg.
* Bloomberg News