India inflation rises, stokes rate hike pressure

NEW DELHI: Indian inflation rose closer to double-digits in August, official figures showed Wednesday, piling pressure on the central bank to hike interest rates again despite a slowing economy.

Annual inflation, according to the benchmark wholesale price index, the country's most widely watched cost-of-living measure, jumped by more than half a percentage point to 9.78 percent in August from July's 9.22 percent.

The latest inflation rise was fuelled by rises in the prices of food, fuel and manufactured products.

Economists said mounting concerns about the domestic and global economies could mean the central bank might pause in hiking rates at its monetary policy-setting meeting on Friday.

But many are still betting on another rate increase.

"The odds are still in favour of a 25 (basis points) hike," said Robert Prior-Wandesforde, head of India and Southeast Asia economics research at Credit Suisse, ahead of the inflation data release.

The central bank has raised rates 11 times in 18 months -- the longest stretch of monetary tightening in a decade -- in a bid to tame inflation which is the fastest among major economies.

India's economic growth has slowed under the brunt of the hikes as borrowing costs have surged for everything from consumer appliances to cars to plant equipment.

Inflation is one of the biggest headaches for India's Congress-led government, which is also battling a slew of corruption charges.

The price gains have heaped misery on India's hundreds of millions of poor, who are the Congress party's key supporters.

June's provisional inflation figure was revised upward to 9.51 percent from an earlier 9.44 percent.

Copyright AFP (Agence France-Presse), 2011