India inflation eases but RBI warns of rising commodity prices

NEW DELHI, Aug 3, 2007 (AFP) – India’s inflation rate eased to 4.36 percent on falling food prices, official data on Friday showed, after the central bank held benchmark interest rates steady earlier in the week. Inflation dropped in line with market expectations for the week ended July 21 from 4.41 per cent for the previous week on the back lower prices for food items such as pulses, fruits and eggs.

According to the wholesale price index — India’s most closely watched cost-of-living monitor — inflation stood at 4.72 per cent for the sane period a year ago.

The latest inflation figures came after the Reserve Bank of India in its quarterly policy review on Tuesday kept its key repo rate steady at 7.75 percent.

But the bank warned hawkishly that “inflationary pressures remain and are more persistent than before, along with high commodity and asset prices.”

In an effort to cool credit demand, the central bank cut the amount of money available for loans by hiking the commercial banks’ cash reserve requirements by 50 basis points to seven percent.

The Reserve Bank of India said billions of dollars of foreign investment in the stock market this year has flooded banks with the cash that is fu