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"I must say inflation has been a concern, inflation is a concern, in a country where about 25 percent of the population is poor," he said at a meeting of the Asian Development Bank in Madrid.
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"Of course in a pre-election year in a democracy it is a big concern but I think the government is doing everything possible to manage inflation," he added.
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India's annual inflation rose by over two-tenths of a percentage point to touch a 42-month peak of 7.57 percent for the week ended April 19, up from 7.
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33 percent a week earlier, official data released Friday showed.
The new inflation rate, which was fueled by rising food and energy prices, exceeded analysts' forecasts of around 7.
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40 percent and was far above the Reserve Bank of India's declared comfort level of 5.
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50 percent for the current financial year to March 2009.
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Rao said the Indian government spent the equivalent of about 2.
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0 percent of gross domestic product on subsidies for food, fertilizer and energy to help offset the impact of risi