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India’s Inflation at 7.35% Exceeds All Estimates as Food Surges

Vrishti Beniwal

(Bloomberg) -- India’s headline inflation surged to a more than five-year high in December, breaching the central bank’s 6% tolerance limit and will likely keep monetary policy makers in pause mode for longer.

Consumer prices rose 7.35% in December from a year earlier, the Statistics Ministry said in a statement on Monday. That’s faster than the 6.7% median estimate in a Bloomberg survey of 37 economists and the steepest gain since July 2014.

Key Insights

The gains were driven by rising cost of everything from food to fuel and medicines to mobile tariffs. Food price inflation accelerated 14.1%, led by a surge in vegetable costsInflation breaching the upper end of the Reserve Bank of India’s 2%-6% target band is likely to keep the Monetary Policy Committee on pause mode in February, after it unexpectedly held rates in December citing “much higher than expected” growth in pricesPrice stability is the central bank’s prime objective as persistently high inflation disproportionately affects the poor, Governor Shaktikanta Das said last week. That has turned the focus on the government’s annual budget due Feb. 1 for measures to boost economic growthAsia’s third-largest economy is set to expand at the slowest pace since 2009, according to an official forecast

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Fuel and light prices rose 0.7%, housing prices gained 4.3%, clothing and footwear prices rose 1.5%, while food and beverage prices rose 12.16%To read the full statement on consumer prices, click here

(Updates with details under Get More section)

--With assistance from Tomoko Sato.

To contact the reporter on this story: Vrishti Beniwal in New Delhi at vbeniwal1@bloomberg.net

To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net, Karthikeyan Sundaram, Subramaniam Sharma

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