India Central Bank May Raise Interest Rates Anytime on Inflation, Sen Says

India's central bank may raise interest rates "anytime" after inflation unexpectedly accelerated last month, said Pronab Sen, the government's top statistician.

Core inflation, which excludes food and fuel, is becoming "worrisome," Sen told reporters in New Delhi today. Sen isn't connected with the central bank, which sets the monetary policy.

Core inflation accelerated to 6.58 percent in May from 0.8 percent in December, according to Nomura Holdings Inc. economist Sonal Varma. Reserve Bank of India Governor Duvvuri Subbarao said June 18 that rates will be increased in a "calibrated" way, given the cash shortage in the economy and risks to growth posed by Europe's debt crisis.

The yield on the 10-year government bond gained one basis point to 7.58 percent at 11:13 a.m. in Mumbai after Sen's comments.

India's benchmark wholesale-price inflation rate advanced 10.16 percent in May.

"It can do it at anytime," Sen said, referring to the central bank increasing borrowing costs. "That is a call they have to take."

The Reserve Bank has increased rates twice since mid-March and is scheduled to announce the next monetary policy decision on July 27. The bank's reverse repurchase rate is 3.75 percent and repurchase rate is 5.25 percent.

Finance Minister Pranab Mukherjee on June 21 said inflation of between 3.5 percent to 4 percent is "tolerable."

To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net; Bibhudatta Pradhan in New Delhi at bpradhan@bloomberg.net

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