Indian inflation above 5pc

Published March 8, 2008

NEW DELHI, March 7: India’s inflation rate crossed five per cent to hit a nearly 10-month high, according to official data on Friday, dealing a blow to the government and reducing chances of an early interest rate cut.

Inflation climbed more than a tenth of a percentage point to 5.02 per cent for the week ended February 23 from 4.89 per cent the previous week, according to the wholesale price index, India’s most watched cost-of-living monitor.

After the latest data, “the chance of a cut in interest rates in the near-term has reduced,” said R. Balakrishnan, executive director at Mumbai’s Centrum Broking.

Inflation is still far below its two-year high of 6.69 per cent hit in early 2007. But inflation breached the central bank’s target of close to five per cent for this fiscal year ending March 31, 2008, and surprised analysts who forecast it would fall to around 4.8 per cent.

The rise driven by hikes in the cost of fish, vegetables, fruit, milk and other essential foods — also came as unwelcome news for the government, which is worried about prices rising with just over a year to go before the next general elections, analysts say.—AFP

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