India’s tolerance of inflation

NEW DELHI, Feb 11, 2007 (AFP) – Inflation is rearing its head in booming India, sparking warnings that soaring food prices spell misery for the poor and that the country’s economy may be overheating. The wholesale price index, India’s most closely watched cost-of-living indicator, on Friday showed inflation at 6.58 percent, the highest reading since December 2004 and up from 4.04 percent a year earlier.

The figure, blamed mainly on the rising cost of staple items such as garlic and lentils, came a day after India hiked its annual economic growth forecast.

It now foresees a breakneck 9.2 percent expansion, due in part to a surge in the manufacturing and services sectors, up from a an earlier prediction of around eight percent plus.

Inflation “is a very serious issue for the (Congress-led) government. I think it’s the single biggest political issue it faces,” said political analyst Mahesh Rangarajan.

He added that it may have an impact on the outcome of upcoming state polls.

The government faces elections in three northern states this month and polls in April in Uttar Pradesh, India’s most populous state and one considered politically pivotal.

Politicians have grim memori