As GST Kicks In, Concerns About Core Inflation Rise

Indians have started paying more for items ranging from movie tickets to cholesterol tests, thanks to the new goods and services tax, and that raises the prospect the central bank will grow more cautious about cutting interest rates deeply.

Increases in charges for services, if sustained, threaten to push up core inflation, which excludes food and energy prices. Nomura estimates the annual core rate could rise as much as 60 basis points.

Although headline inflation slumped to 2.18 percent in May, its lowest since a new series was adopted five years ago, core inflation has stubbornly stayed above 4 percent for years.

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