Onion prices sting RBI ahead of Raghuram Rajan's first policy review

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Raghuram Rajan took over at the RBI on Sept 4 in the middle of India's worst economic crisis in 20 years. Reuters Raghuram Rajan took over at the RBI on Sept 4 in the middle of India's worst economic crisis in 20 years. Reuters
SummaryRaghuram Rajan took over at the RBI on Sept 4 in the middle of India's worst economic crisis.

The aroma of frying onions from the Britannia and Co. restaurant might not penetrate the office of Reserve Bank of India (RBI) governor Raghuram Rajan a block away, but like the eatery's customers, he can't escape the soaring price of the pungent vegetable.

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The price of onions has added to Rajan's already full plate as the new head of the Reserve Bank of India (RBI) wrestles over how to help stabilise the Indian rupee currency and tackle inflation without further dampening economic growth.

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A former IMF chief economist, Rajan took over at the RBI on Sept 4 in the middle of India's worst economic crisis in 20 years. He will announce his first monetary policy review on Friday.

The US Federal Reserve's surprise decision on Wednesday not to wind down its massive monetary stimulus just yet helped the rupee to a one-month high on Thursday, so inflation may have now moved up on his list of priorities.

In August, the cost of onions was 245 percent higher than a year earlier, while other vegetables shot up 77 percent, driving headline inflation to a six-month high. Onion prices have risen even further in September, prompting the government to take steps to limit exports.

Eaten raw as a side dish, or blended into a vast array of curries, onions play a prominent role in Indian cuisine and public anger rises quickly whenever prices spike.

PRICE PINCH

In Britannia, the pinch is being felt by customers who include employees of the Reserve Bank of India (RBI), who drop by to lunch on steaming plates of its famous Parsi berry pulav rice.

"Instead of one person eating one plate, two people are splitting. And three people are dividing two plates," said Boman Kohinoor, the 91-year-old co-owner of the restaurant.

Much remains unchanged in Britannia, which was founded in 1923, 12 years before RBI was set up. But the prices keep on rising.

The restaurant raised prices on its menu by between 30 and 50 rupees ($0.50-$0.80) earlier this year -- a fragrant plate of rice-based chicken biryani now costs 350 rupees -- and Kohinoor said the soaring costs of ingredients may force him to hike prices again by April.

With overall food prices up an annual 18 percent last month, Kohinoor's new neighbour at the Reserve Bank will probably be careful not

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