India says inflation pressures warrant government, central bank vigilance

NEW DELHI, Aug 22 (Reuters) - Inflationary pressures in India caused by global uncertainty and domestic disruptions will require greater vigilance by the government and the Reserve Bank of India, the finance ministry said in its monthly economic report on Tuesday.

The ministrys comments come weeks after data showed retail inflation in July rose to its highest in 15 months, as vegetable and cereals prices skyrocketed.

“Global uncertainty and domestic disruptions may keep inflationary pressures elevated for the coming months, warranting greater vigilance by Government and the RBI,” the government said.

The finance ministry expects price pressures to abate thereafter.

“The price pressure in food items is expected to be transitory, as evident in the steady performance of the agriculture sector, along with fresh arrivals in the market,” it said.

Prime Minister Narendra Modi will bid for a rare third term at a national election that is due in less than nine months, and containing inflation, especially food prices, would help his chances.

India is bracing for its driest August in more than a century, with scant rainfall likely to persist across large areas, partly because of the El Niño weather pattern.

Recently, India imposed a 40% export duty on onions in an attempt to improve domestic supplies, having banned exports of non-basmati white rice last month.

These are in addition to the wheat export ban imposed last year.