Rate hikes expected as Indian inflation spikes to 7.4-pct

Standing left to right – Mr. Dinesh Jebamani (Chief Manager Liability Product Management and New Age Media – Seylan Bank), Mr.Sudesh Peiris (Senior Manager – Digital Banking Channels – Seylan Bank), Ms. S.Senevirathne (Representative of the Revenue Department – Western Province), Mr. Tilan Wijeyesekera (Deputy General Manager – Retail Banking – Seylan Bank) and Mr. Malik Wickremanayaka (Deputy General Manager – Operations – Seylan Bank)

NEW DELHI, April 11, 2008 (AFP) – Indian inflation accelerated to 7.41 percent, according to official data released Friday, dealing a blow to the government and fanning expectations of monetary tightening.

Annual inflation quickened to 7.41 percent for the week ended March 29, from seven percent the previous week, according to the Wholesale Price Index, India’s most-tracked cost-of-living monitor.

The figure was above market forecasts of 7.03 percent and comes amid growing worldwide concern about inflationary pressure from soaring commodity prices, including for food and fuel.

Inflation has climbed steeply from a trough of 3.1 percent in October and is way above the central bank’s declared tolerance level of five percent.

The country faces the daunting task of trying to keep food and other goods affordable for its population of more than 1.1 billion people, many of whom live in grinding poverty.

The inflation numbers were alarming reading for the Congress-led government, which owes its upset 2004 election win to support from India’s teeming poor, who have been hardest hit by inflation.

Congress faces nearly a dozen state polls this year and general elections by May 2009.