Indian inflation accelerated sharply as the weakest monsoon in decades helped drive up food prices, official data showed Thursday. Prices rose by a faster-than-expected 0.83 percent year-on-year for the week ended September 12, according to the Wholesale Price Index (WPI), India's most-watched cost-of-living benchmark. The rise outpaced analysts' forecasts of a gain of around 0.68 percent in annual inflation.
Inflation stood at 0.37 percent the previous week. The cost-of-living data was pushed up by increases in the prices of raw food items, which climbed by 16.32 percent on an annual basis, driven mainly by a near 50-percent rise in vegetable prices. The figures came a day after the weather office announced India had suffered its worst drought since 1972 with rains 23 percent below average at the end of the four-month monsoon season.
After a period of statistical deflation since June, the latest figures confront the central bank with a dilemma about when to take the first steps to tighten monetary policy to keep a lid on prices as the economy recovers. Economists have forecast inflation could reach eight percent by March 2010, significantly beyond the central bank's five percent estimate.