Indian Inflation Surges to 13-Year High

23 June 2008

MUMBAI: A fuel hike and a rise in food prices drove Indian inflation to its highest level in 13 years, surging to 11.05% in the week ended June 7, from 8.75% a week earlier.

Dubbed the "double-digit shocker", by Indian television, analysts believe there is worse during the rest of the year.

Says HSBC economist Robert Prior-Wandesforde: "With the general election fast approaching... the government's worst inflationary nightmares are coming true."

Interest rates are now expected to rise as the government tries to bring prices under control before the elections, to be held at the latest next May.

However, warns Abheek Barua, chief economist at India's HDFC Bank: "We're getting into very dangerous territory, I can't see inflation being brought down substantially from these levels over the next few months."

India's economy grew 9% in the last financial year, second only to China, but some economists expect it slow to 7% or under as a result of monetary tightening.

Data sourced from BBC Online; additional content by WARC staff