India hikes interest rates 50 basis points

MUMBAI: India's central bank hiked interest rates by a higher-than-expected 50 basis points on Tuesday, its 11th increase since March 2010 to combat near double-digit inflation.

The Reserve Bank of India (RBI) raised its repo rate at which it lends to commercial banks to 8.0 percent and increased the reverse repo -- the rate it pays to banks for deposits -- to 7.0 percent.

The repo rate is now at a near three-year high and the reverse repo is at its highest level in more than a decade, analysts say.

Overall, India has the highest inflation rate of any large Asian economy.

After a quarterly meeting of policy makers in the financial capital Mumbai, RBI Governor Duvvuri Subbarao blamed the move on a range of factors, including higher fuel prices and the rising cost of non-food goods.

"Although the impact of past monetary policy actions is still getting transmitted, considering the overall growth and inflation scenario, there is a need to persevere with the anti-inflationary stance," he said.

The benchmark 30-share index on the Bombay Stock Exchange was 0.85 percent or 159.95 points down at 18,711.34 following the announcement.

Copyright AFP (Agence France-Presse), 2011