Bloomberg News

Oil Price Limiting India’s Monetary Policy Options, Gokarn Says

September 28, 2011

Sept. 28 (Bloomberg) -- Crude oil prices pose a challenge to India’s central bank, limiting its monetary-policy options, Deputy Governor Subir Gokarn said today.

“Even as concerns about global economic activity have started to increase, oil prices have remained very steady,” Gokarn said at a conference in New Delhi today. “This is a huge problem to deal with, because it reduces the space monetary policy has in responding to the cycle.”

Concerns that the debt crisis in Europe will hurt global growth haven’t deterred Brent crude in London from rising 36 percent in the past year, fanning inflation in the South Asian country. Energy costs account for about 15 percent of the wholesale-price index in India, which depends on imports to meet 80 percent of its annual oil requirements.

The Reserve Bank of India has increased its benchmark repurchase rate 12 times starting March 2010, the last of which was on Sept. 16, to tame the fastest pace of price gains among the so-called BRICS economies. Governor Duvvuri Subbarao said this week in New York that inflation is “fairly stubborn,” even as his counterparts in other Asian nations from South Korea to Malaysia kept borrowing costs unchanged this month.

India’s benchmark wholesale-price inflation of 9.78 percent in August compares with consumer price gains of 7.2 percent in Brazil, 8.2 percent in Russia, 6.2 percent in China and 5.3 percent in South Africa last month from a year earlier.

--Editors: Abhay Singh, Sam Nagarajan

To contact the reporter on this story: Unni Krishnan in New Delhi at

To contact the editor responsible for this story: Stephanie Phang at

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