A customer is seen at the vegetable section of the Big Bazaar Hypermarket in Noida. A deputy governor of the Reserve Bank of India yesterday said Indian interest rates will remain elevated as long as surging inflation imperils economic growth. Bloomberg /New Delhi Indian interest rates will remain elevated as long as surging inflation imperils economic growth, a deputy governor of the country's central bank said. "If you are having continuously high inflation, it will kill your growth," the Reserve Bank of India's K C Chakrabarty told Bloomberg TV India on Thursday. "If interest rates are high, that's because inflation is high, and unless inflation is brought down, interest rates will not come down." Governor Raghuram Rajan is seeking to quell consumer inflation of more than 11%, the highest in the Group of 20 major economies, as bottlenecks in the supply of everything from food to energy stoke price increases. He surprised economists last month by holding the benchmark repurchase rate at 7.75% instead of adding to increases totalling 50 basis points since taking over the RBI in September. "Inflation is likely to remain elevated this year as well and may average over 9%," said Sonal Varma , an economist at Nomura Holdings in Mumbai , who expects Rajan to raise the key rate by 25 basis points at the next policy meeting on January 28 . "Continuing price pressures will leave the RBI with no choice but to raise the repurchase rate." Ashima Goyal , a member of an RBI committee that makes recommendations to Rajan on monetary policy, said in an interview earlier this week that he will avoid further increases to the repo rate if inflation fell in December, and may even have room for a reduction. She didn't specify how much prices need to drop in that scenario. Consumer prices climbed 11.24% in November. Wholesale inflation was 7.52%, a 14-month high, as onion prices tripled from a year earlier. "We have to improve the productivity, efficiency, distribution system, and, at the same time, keep our monetary policy such that demand factors should not play a role," Chakrabarty, 61, said in the interview in Mumbai . A weaker rupee is among the causes of Indian inflation, with the currency down about 12.5% against the dollar in the past year. The yield on the 10-year government bond has climbed to 8.84% from about 8% in the same period. "The depositor has to be given a higher return than inflation, otherwise he will not save money," said Chakrabarty, who has been an RBI deputy governor since 2009.
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