India inflation hits 10-month high, surprises analysts

NEW DELHI, December 14, 2009 (AFP) – India’s inflation rate jumped to its highest level in 10 months, according to official data Monday, increasing pressure on the central bank to begin reversing aggressive interest rate cuts. The wholesale inflation rate, India’s closest watched inflation measure, increased by 4.78 percent in November from a year earlier after rising by 1.34 percent in October, fuelled by soaring food prices.

The year-on-year rise in the Wholesale Price Index, or WPI, which is compiled monthly, outpaced market projections of a 4.2 percent rise.

Inflation has been resurging in Asia’s third-largest economy as food prices have leapt on lower agricultural output following the worst monsoon in nearly four decades.

The cost of food items climbed by 16.71 percent in November from a year earlier, the government data showed. Prices of staples such as potatoes doubled while the cost of pulses climbed by 35.22 percent.

A reviving economy has stoked inflationary pressures. The manufacturing products index, in the new inflation data, rose by 3.99 percent.

The increase in inflation has created a dilemma for the central bank which wants to keep economic growth in Asia’s third-largest economy