India confident on inflation even with sub-par monsoon

[NEW DELHI] India will be able to manage potential inflationary pressures if forecasts of sub-par monsoon rains this summer are borne out, junior finance minister Jayant Sinha told Reuters in an interview.

Last week the weather department predicted the June-September monsoon season would be below average due to the impact of an El Nino weather pattern, raising concern that poor summer-sown crops could drive up food prices and fan inflation. "Just like we have done in the past, we are very confident that this year as well we will be able to manage potentially inflationary pressures," Mr Sinha said.

Mr Sinha also advised exporters to rely on innovation rather than on the advantage of a weak currency to boost India's international competitiveness.

Merchandise exports, which make up around 16 per cent of India's US$2 trillion economy, shrank for the fourth month in March, with the 21 per cent annual decline the steepest since 2009.

Exporters blame the plunge on the relentless appreciation in the rupee, which gained more than 11 per cent in terms of its real effective exchange rate (REER) in the 12 months to March.

A collapse in the value of the euro has hit exports to Europe particularly hard. "The rupee right now is kind of trading in a band that most people think it should be," Mr Sinha said. "The focus on our global competitiveness and the quality of innovation is the best way to grow our exports."

REUTERS