India's inflation rate surges to 11.05 pct, 13-year peak

NEW DELHI - India's annual inflation rate accelerated to 11.05 percent, its highest level in 13 years, according to data on Friday,piling pressure on the government as general elections loom.

By (AFP)

Published: Fri 20 Jun 2008, 2:56 PM

Last updated: Sun 5 Apr 2015, 1:11 PM

Inflation jumped by more than two percentage points to hit 11.05 percent for the week ended June 7 from 8.75 percent a week earlier, the official figures showed, stoking expectations of further monetary tightening to tame prices.

The increase was driven by a sharp increase in state-set fuel and cooking gas prices announced earlier this month as well as another rise in food costs.

The new rate incorporated for the first time the increase in fuel prices aimed at stemming huge oil company losses caused by surging global crude prices.

The rise shocked analysts who had forecast that inflation would be around 9.8 percent and was a heavy blow to the government, which desperately wants to tame prices, fearing a voter backlash in national elections due by May 2009.

The Congress party, which heads the national coalition, has suffered a string of state poll defeats with inflation, which has hit India's teeming poor the hardest, blamed as a key culprit.

The inflation figures hit shares, which slumped after the data was announced and were trading down 2.09 percent or 315.34 points at 14,772,62 points as investors feared more interest rate rises that could hit company profits and slow the economy.

India's economy grew nine percent in the past fiscal year, second only to China among big economies, but some economists expect expansion to slow to seven percent or lower this year as a result of monetary tightening.

The data came a week after the central bank hiked its leading lending rate, known as the repo rate, by a of a quarter percentage point to 8.00 percent, a six-year high, the latest in a series of aggressive anti-inflation steps.

Public anger has been mounting over rising prices, and in particular over the fuel price hike.

India's truckers have threatened a nationwide strike from July 2, a protest that would pull four million vehicles off the road, disrupting commercial shipments.

Analysts have said the government had little left in its fiscal arsenal to fight inflation -- it has already banned exports of staple foods like rice to boost supplies and check inflation.

They also said India is a victim of global forces.

The Organisation for Economic Cooperation and Development has forecast inflation globally in 2008 will be the fastest in seven years due to surging international commodity prices and a doubling in oil prices in the past year.

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