India vows action, warns hoarders after May inflation spike

Arun Jaitley blames energy costs and 'speculative hoarding' for a rise in inflation.

By: Reuters | New Delhi | Published:June 17, 2014 12:31 pm
Finance Minister- Arun Jaitley India is committed to easing bottlenecks that have caused inflation to spike, Finance Minister Arun Jaitley said

India is committed to easing bottlenecks that have caused inflation to spike, Finance Minister Arun Jaitley said, blaming energy costs and “speculative hoarding” for a rise in wholesale (WPI) inflation that contributed to an investor selloff on Monday.

The rupee sank below 60 rupees to the dollar and government bonds had their biggest single-day fall in a month on Monday as higher-than-expected May inflation compounded worries about the impact of violence in Iraq on the price of oil, which India imports.

Prime Minister Narendra Modi was elected amid widespread anger about rising prices and has made tackling inflation his top priority. Forecasts of weak monsoon rains that irrigate much of India’s food production have added to inflation fears, with volatile vegetable prices rising by double digits.

“The rise in prices of food articles can also be attributed to withholding of stocks on account of apprehension of a weak monsoon,” Jaitley said in a post on Facebook late on Monday.

“The State Government(s) should take effective steps to ensure that speculative hoarding is discouraged,” he said.

The Indian rupee sank to 60.23 rupees a dollar, its lowest level since May 6, and benchmark 10-year bond yields closed up 5 basis points at 8.65 percent after the government issued May wholesale inflation data on Monday. The annual pace was 6.01 percent, compared with 5.2 percent in April.

“The government is watching the movement of rupee closely,” Jaitley said. “The slight instability of rupee is essentially because of Iraq oil shocks and global fear of oil price rise.”

Jaitley is due to deliver his first budget in July and must balance a commitment to fiscal discipline with the government’s aim of rapidly reviving economic growth.

The government “is committed to take measures which will positively impact the GDP and result in higher growth than expected. I am hopeful that the inflation which is moving upwards now would eventually come down,” he said.

At the weekend, Modi warned that “bitter medicine” was needed to put India’s economy back on track, without giving details.

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  1. G
    Girish
    Jun 17, 2014 at 7:38 am
    considering that Baniyas- traders and middlemen- are the traditional vote base for BJP, and chief contributors to rising inflation, it's dubious to believe that this government will crack down on them.
    Reply
    1. N
      Narayan Krishna
      Jun 17, 2014 at 9:20 pm
      The BJP has been voted to power on the promises of Modi to contain inflation alongwith development and this is a golden chance to prove actions are better than words.They cannot simply brush off saying that this is a legacy handed over to them. Strict action is called against the ders no matter to which party they belong to. The Congress and the opposition are just waiting for any slip by the Govt to pounce on BJP.
      Reply
      1. D
        dipak rai
        Jun 19, 2014 at 12:08 pm
        They even d change. Thus poor customers have to forfeite the balance while purchasing anything.
        Reply
        1. C
          Citizen
          Jun 17, 2014 at 2:14 pm
          The best way to fight this is stream line the public distribution system with modern high tech cheap gadgets to have a control on the availability of stocks at every stage and replenish them by importing/transporting from other places and see they reach the correct persons. Jaihind
          Reply