India's Inflation Tops 10%

Inflation had been clocked at 9.59% in April. The March figure of 11.04% was an upward revision from a provisional figure of 9.9%.

Pressure grew on India's central bank on June 14 to raise interest rates, analysts said, after fresh data showed inflation jumped into double figures in May at 10.16%.

The annual increase in the wholesale price index was pushed by surging manufacturing and industrial growth and rising food costs. In the industrial sector output was up 17.6% in April, its eighth straight month of double-digit growth.

Adding to the pressure on the Reserve Bank of India (RBI) to announce a fresh rate hike were revised figures showing that the annual rate jumped into double figures in March for the first time since October 2008.

The news means the RBI will likely hike interest rates by another 25 basis points, even ahead of its next scheduled policy meeting on July 27, analysts said. "We expect the RBI to act immediately to curb inflationary pressures," said Rupa Rege Nitsure, chief economist with state-run Bank of Baroda. The bank has already raised its two key short-term lending rates twice this year, by 25 basis points in both March and April.

The repo -- the rate at which it lends to commercial banks -- is at 5.25% and the reverse repo -- the rate it pays to banks for deposits, is at 3.75%.

Governor Duvvuri Subbarao in the last policy review in April said "baby steps" would be required to be taken several times to reduce price pressures, possibly in between scheduled meetings.

Inflation had been clocked at 9.59% in April. The March figure of 11.04% was an upward revision from a provisional figure of 9.9%.

Copyright Agence France-Presse, 2010

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