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Friday, February 08, 2008

Indian Wholesale Inflation 26 January 2008

India's inflation accelerated at the end of January to the highest rate in more than five months as prices of fruits, spices and salt increased. Wholesale prices rose 4.11 percent in the week ended Jan. 26 from a year earlier, faster than the previous week's 3.93 percent, the Ministry of Commerce and Industry said today in New Delhi.

Inflation accelerated in the week as prices of manufactured goods, accounting for 64 percent of the wholesale price index, rose 0.3 percent from the previous week.

The Reserve Bank of India kept the benchmark interest rate unchanged last week on concern rising fuel and food prices may fan inflation. The central bank has also allowed the rupee to appreciate to reduce the cost of imports and curb price gains.

That's helped the government damp inflation, which reached a more than two-year high of 6.69 percent almost exactly a year ago.

Inflation is a sensitive issue in the $906 billion economy and rising prices may cause the Congress party to lose votes in forthcoming elections. The term of Singh's government ends June 1, next year. The ruling Congress party lost elections in four states in 2007, reducing its influence in parliament. The party was ousted in Punjab and Uttarakhand states and fell further behind in the nation's most populous provinces of Uttar Pradesh and Gujarat.

In the meantime the capital inflows continue, and India's foreign exchange reserves rose in the week ending February 1, to $292.6 billion dollars, from $288.3 billion a week earlier.