Egypt Crisis "New Risk" to India's Inflation

We have made a number of posts on the food inflation crisis in India and the overall weakness of the global economy.  People are starting to take notice to the fact that the crisis in Egypt will affect the entire region.   New concerns today from India on how rising oil prices may exacerbate their already dicey inflation problems.  India is going to be a big story this year.  Let's hope they find some solutions quickly!

Egypt Crisis Poses ‘New Risk’ to India’s Inflation

February 07, 2011, 7:34 AM EST

By Anoop Agrawal and Kartik Goyal

Feb. 7 (Bloomberg) -- Egypt’s political crisis may drive oil and commodity prices higher, Indian central bank Deputy Governor Subir Gokarn said, flagging a “new risk” to inflation that may spur policy makers to boost interest rates.

“There’s obviously a risk that the situation will transmit into higher commodity prices,” Gokarn told reporters in New Delhi today. “So, that intensifies the risk.”

Indian government bond yields climbed to a three-week high as Asia’s third-largest economy, which meets about three quarters of its annual energy needs from imports, braces for the impact of higher fuel costs. Oil prices could more than double if the unrest in Egypt forces the closure of the Suez Canal, Venezuelan Oil Minister Rafael Ramirez said Feb. 4.

“Everybody is bearish on bonds due to the gains in prices,” said Debendra Kumar Dash, a fixed-income trader at Development Credit Bank in Mumbai. “The Egypt issue has also added to the uncertainty on the oil front.”

           >> Continue reading

           Source: Bloomberg BusinessWeek