Indian Inflation Rises to Almost 12%

Increasing price of staples is main cause of inflation

Stoking expectations of further monetary tightening to tame prices, India's annual inflation accelerated to close to 12%, official data released July 31 showed.

Inflation jumped nearly a tenth of a percentage point to hit 11.98% for the week ending July 19, up from 11.89% a week earlier, according to the Wholesale Price Index.

The rise came days after India's central bank hiked its key short-term lending rate by a bigger-than-expected half-a-percentage point to nine percent in an aggressive bid to tame inflation riding at a 13-year high.

The Reserve Bank of India also raised by a quarter point to nine percent the percentage of cash commercial banks must park with the central bank -- the cash reserve ratio -- in a bid to curtail credit growth.

The latest inflation rise was driven by increases in the prices of such staples as grains, fruit and spices.

Goldman Sachs economist Tushar Poddar said in a research report released earlier this week he expected inflation to "remain in double digits through 2008 before coming off significantly in 2009." He forecast another 25 basis point hike in the repo rate and a similar rise in the cash reserve ratio by the end of October.

Copyright Agence France-Presse, 2008

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