India inflation surges to 8-year high in fresh RBI challenge

INDIA'S headline inflation accelerated for a seventh month to the fastest since May 2014, further challenging the central bank's efforts to contain surging prices and sustain an economic recovery.

Consumer prices increased 7.79 per cent in April, the Central Statistics Office said in a statement on Thursday (May 12). That compares with a 7.42 per cent gain predicted in a Bloomberg survey of economists and 6.95 per cent the previous month.

Inflation has been running ahead of the the Reserve Bank of India's (RBI) 2 per cent-6 per cent target range for 4 straight months, helping trigger a surprise rate hike last week. Governor Shaktikanta Das has since last month stressed the need to prioritise taming price gains over supporting growth.

The stage is set for a likely further rate hike at the RBI's next meeting in June, when it's expected to revise up its 5.7 per cent inflation forecast for the current April-March fiscal year.

High inflation may force the RBI to raise rates by 75 to 100 basis points over the course of the fiscal year, said Gaurav Kapur, chief economist at IndusInd Bank in Mumbai. Inflation will likely stay above 6 per cent until September, he added.

According to Thursday's release, consumer food prices rose almost 8.4 per cent while fuel gained about 11 per cent. BLOOMBERG