India's central bank warned yesterday that inflation would rise to 5 per cent by March and told the country's newly re-elected government that it needed to rein in public spending in the years ahead.
The call came in the Reserve Bank of India's first-quarter review of monetary policy. Duvvuri Subbarao, governor of RBI, said the government had to explain how it would put the public finances on a stronger footing after projecting a higher fiscal deficit for this year of 6.8 per cent of gross domestic product, the highest in 16 years, in the national budget this month.
The planned rise in spending is aimed at returning India to the high levels of economic growth it enjoyed before the global financial crisis.
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