India's Apex Bank May Tighten Money Supply As Prices Soar

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With inflation touching a 10-month high of 4.78% in November, the Reserve Bank of India is likely to change its monetary policy and tighten money supply with a rise in interest rates, media reports said.

The rise in inflation based on wholesale price index is mainly due to the rise in prices of primary articles, including food items. The latest data released by government on Monday revealed that the index of primary articles grew 11.8% with food prices escalating 16.7% in November. The weekly data on food items also showed that the prices have risen 19.04% in the last week of November as against the same period last year.

Finance Minister Pranab Mukherjee said the inflation rose on the back of rising food prices. But, finance secretary Ashok Chawla said the rise in prices of commodities was always a concern to the government. He further said that the government is taking administrative measures to control inflation, adding that it is not a surprise.

According to economists, the latest inflation figures would pressurize the apex bank to take harsh measures with a hike in interest rates to curb demands in the market.

(Market News Provided by RTTNews)