India inflation crosses 5% to hit a 10-month high

This article belongs to the India inflation watch story arc.

channelnewsasia.com :

India's inflation rate crossed 5% to hit a nearly 10-month high, according to official data Friday [7 Mar 2008], dealing a blow to the government and reducing chances of an early interest rate cut. Inflation climbed to 5.02% for the week ended February 23 from 4.89% the previous week, according to the wholesale price index, India's most watched cost-of-living monitor. Inflation is still far below its two-year high of 6.69% hit in early 2007 but breached the central bank's target of close to 5% for this fiscal year ending March 31, 2008, and surprised analysts who forecast it would fall to around 4.8%.

The rise - driven by hikes in the cost of fish, vegetables, fruit, milk and other essential foods - also came as unwelcome news for the Congress-led government, which is worried about prices rising with just over a year to go before the next general elections. Reserve Bank of India governor Y.V. Reddy said the central bank would continue to focus on achieving price stability at the same time as trying to achieve its other twin goal of economic growth. Reddy added the bank was also concerned about rising global commodity and fuel costs. Falling Indian wheat and rice output is also stoking inflation. Both India and giant neighbour China have made fighting inflation a top priority. Inflation in China stood at 7.1% in January.

- As the economists and analysts continue to be surprised, inflation continues to take off globally, and it continues to upset existing economic models everywhere. One thing we can be sure of - there will be more surprises to come.

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