Indian inflation up 11.63 pct, rate hike seen

Posted 07 5 2008 1:36AM

NEW DELHI (AFP) - India's annual rate of inflation rose to 11.63 percent as the country continued to feel the knock-on effect of a hike in state-set fuel prices, government data released Friday showed.

The rate, for the week ended June 21, was against 11.42 percent for the previous week and remains at a more than 13-year high, according to the Wholesale Price Index, the most closely watched price monitor.

The rise was marginally higher than expected by analysts, who had forecast the figure to be more or less flat.

Up were prices of cooking oil, tea, fruits and vegetables as transporters absorbed the impact of last month's rise in pump prices of around 11 percent. Prices of manufactured goods including iron, steel and cement were also up.

"The inflation figure is above our forecast of 11.31 percent," said Shuchita Mehta, senior economist with Standard Chartered Bank.

She said she expected the central Reserve Bank of India to raise the repo rate -- its key short term lending rate currently at 8.5 percent -- by 50 basis points at its next meeting on July 29.

The RBI can also be expected to hike the Cash Reserve Ratio, or the amount of cash banks must hold in reserve, by 25 basis points. The bank unleashed its latest round of monetary tightening on June 24, putting the repo rate and CRR up by 0.5 percent each.

"Inflation was above our forecast, though just marginally," said Siddhartha Sanyal of brokerage Edelweiss Securities.

The brokerage has forecast India's economic growth rate at 7.8 percent for the year to March 2009.

Economists expect growth in Asia's third-largest economy to slow this year on higher borrowing costs and tough global financial conditions. The prime minister has projected growth of more than eight percent.

The benchmark 30 share Sensex index was up 1.38 percent or 180.69 points at 13,274.8 on Friday, largely ignoring the inflation data.