India's inflation rate has risen to a 15-week high of 5.16 percent, according to official figures, fuelling expectations of an interest rate hike as early as this month.
The wholesale price index, the most closely watched price barometer in Asia's fourth-largest economy, jumped nearly four-tenths of a percentage point in the week ending September 30 from 4.77 per cent a week earlier, data showed Friday.
The inflation jump followed figures Thursday showing a 9.7 percent rise in August's industrial output, which economists said raised chances that the Reserve Bank of India would boost rates at its monetary policy meeting on October 31. "The economy has been growing very fast and there are inflationary pressures in the economy," said Crisil credit rating economist D K Joshi. The central bank "is definitely going to raise rates at the October 31 meeting," he said.
But Finance Minister P Chidambaram said there was no pressure on interest rates to rise as prices would ease once essential food items arrived in the market place.
"The (supply) constraints will be addressed once the new sugar, new wheat come in," Chidambaram told reporters Friday. The government has promised to address food supply worries.
The increase in the price of food staples is of key concern to the ruling Congress party, which owed its surprise 2004 election victory to support from India's poor masses. Chidambaram had earlier said he set the "comfort" level for inflation at below four percent. The central bank has forecast inflation of five to 5.5 per cent for the fiscal year to March 2007.
The bank has hiked its leading short-term rate by 150 basis points since October 2004 to 6 percent, the highest in four years, in a bid to keep a lid on prices in India, which has the second-fastest expanding big economy after China.
India posted an 8.9 percent rise in first quarter gross domestic product after the economy grew by 8.4 percent in 2005-06. The inflation figures came as Indian share prices closed at a record high Friday amid expectations of strong second-quarter corporate earnings and sustained economic growth.
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