Higher inflation in India adds credibility to official growth numbers

NEW DELHI - Consumer price inflation in India came in stronger than expected in May at 5.76% y/y, closing a window for further interest rate cuts. In a research note, ANZ Bank says the inflation outcome adds credibility to headline growth figures, which some had seen as dubious.

“The Indian economy grew by 7.9% in the January-March period compared to a year earlier, a growth outturn that was largely taken with a grain of salt,” ANZ says.
“The turn in inflation, despite the fact that some measures of core are softening, may not be entirely due to food dynamics alone. Indeed, this suggests that the Indian economy is growing above a potential rate (lower than previously thought), and this is adding to inflation pressures.”  www.live.anz.com (ATI).