High inflation affecting export competitiveness: RBI

High inflation which is pushing cost of merchandise production is affecting competitiveness of Indian exports, the Reserve Bank of India (RBI) said today.

"Higher inflation differential between India and major trading partners is a source of pressure on the competitiveness of Indian exports. Containing inflation, thus, is important even for improving the external balance position," the RBI said, ahead of its monetary policy review tomorrow.

The RBI said overall inflation, which stood at 8.62 per cent in September, is "above the comfort level".

During the April-September 2010-11 period, the exports increased by 28 per cent to $103.64 billion compared to the same period previous fiscal, according to an official data.

Though the growth this fiscal is impressive, it has come on a low base of comparison of the last fiscal, when the global trade had hit a new low under the recessionary conditions in several markets.

However, imports grew even faster. Import in the first half of the current fiscal stood at 166.4 billion, an increase of 29.9 per cent year-on-year, translating into a massive trade gap of $62.83 billion during April-September 2010-11 period.