New Delhi has been struggling to control inflation, which hit 8.43 percent in December, with the political cost of rising prices causing deep concern in the ruling Congress party.

On Sunday state-run fuel retailers, who have been hit by higher crude oil costs, upped petrol prices by about 2.50 rupees a litre to take the price of a litre in the capital to about 58.37 rupees ($1.28).

The 4.5-percent hike was the latest in a series of increases since the government lifted controls on petrol prices in June in a bid to cut the multi-billion-dollar oil subsidies paid to state energy firms.

Food inflation has been in the headlines in recent weeks as onions, a staple ingredient in Indian cooking, tripled from their normal level due to unseasonable rains that spoiled crops late last year.

The latest fuel increase, following a similar move in mid-December, drew angry protests from the opposition.

"This hike is totally unjustified. This is nothing but loot of the common man by the government. We call for its rollback," BJP spokesperson Prakash Javadekar said.

Previous fuel hikes have led to major nationwide protests.

The Indian central bank, which held rates in December, is now widely forecast to hike them again when it meets on January 25.

The Reserve Bank of India was one of the most aggressive central banks worldwide in 2010, raising the cost of borrowing on six separate occasions as the South Asian economy powered out of the global downturn.

The economy grew a forecast-breaking 8.9 percent year-on-year in the July-September 2010 quarter and is forecast by the government to expand 9.0 percent in the fiscal year to March 31.

Despite the government freeing petrol prices, the state firms continue to informally consult the oil ministry before revising prices.