Inflation jumps to 7.41% in India
Posted: 11 April 2008 1628 hrs

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NEW DELHI: India's inflation accelerated to 7.41 per cent, according to official data released Friday, dealing a blow to the government and fanning expectations of monetary tightening.

Annual inflation quickened to 7.41 per cent for the week ended March 29, from seven per cent the previous week, according to the Wholesale Price Index, India's most-tracked cost-of-living monitor.

The figure was above market forecasts of 7.03 per cent and comes amid growing worldwide concern about inflationary pressure from soaring commodity prices, including for food and fuel.

Inflation has climbed steeply from a trough of 3.1 per cent in October and is way above the central bank's declared tolerance level of five per cent.

The country faces the daunting task of trying to keep food and other goods affordable for its population of more than 1.1 billion people, many of whom live in grinding poverty.

The inflation numbers were alarming reading for the Congress-led government, which owes its upset 2004 election win to support from India's teeming poor, who have been hardest hit by inflation.

Congress faces nearly a dozen state polls this year and general elections by May 2009.

"If the government fails to tackle inflation, it will pay the political price for its failures," D. Raja, a senior leader of the Communist Party of India, told the Times Now television network.

The Communist Party helps to prop up the minority government in parliament.

Analysts forecast additional fiscal moves by the government, including more import duty cuts and higher export taxes but added these could not solve what was a global problem.

Some saw inflation pushing up to eight per cent in the coming months.

Other economists also saw more monetary tightening with the central bank expected to hike the cash reserve ratio -- the amount banks must hold as cash reserves --- to curb liquidity.

They also said they did not rule out another increase in rates, which are already at six-year highs.

A slew of interest rate hikes have already slowed the economy by driving up loan costs, hitting consumer demand and industrial growth. - AFP/ac