Wholesale prices climbed 5.02 percent in the week ended Feb. 23 from a year earlier, faster than the previous week's 4.89 percent, the Ministry of Commerce and Industry said in New Delhi.
Reserve Bank of India Governor Yaga Venugopal Reddy said tackling inflation is a higher priority than boosting economic growth, following the publication of today's report which showed prices breached the bank's 5% inflation target for the first time in nine months.
"The large segments of the poor tend to reap the benefits of high growth with a time lag while the rise in prices affects them instantly," according to Reddy's comments in the prepared text of a speech he is scheduled to give in Paris today. "Considerable weight is currently accorded by the Reserve Bank of India to price and financial stability while recognizing its twin objectives of growth and stability."
Reddy has raised the central bank's policy rate nine times since October 2004 and ordered lenders to set aside more money as reserves five times since December 2006 to slow consumer borrowings and tame manufacturing prices. Manufacturing price inflation has declined 40 percent in the past year.
Meanwhile India's rupee fell by the most in a week since August this week on speculation equity market losses will spur global funds to reduce investments. The currency fell to the lowest in almost six months after data from the stock market regulator showed funds based abroad increased sales of local equities. The rupee declined after oil prices climbed to a record, raising concern India's widening current-account deficit will boost demand for dollars. The rupee weakened 1.3 percent to 40.535 per dollar this week in Mumbai, the biggest loss since the five days ended Aug. 17 and the lowest closing level since Sept. 17.
India's benchmark share index fell 3.4 percent, rounding off the biggest weekly loss since May 2006. The index has lost 21.3 percent this year after gaining 47 percent in 2007.
Funds based abroad sold more shares than they bought in the four days through March 4, the longest run in more than two weeks, data from the Securities and Exchange Board of India show. They sold a net $3.2 billion this year, following net purchases worth a record $17.2 billion last year.
India's capital-account surplus rose to a record $33.9 billion in the quarter through September, according to the central bank. The current-account shortfall widened 6 percent to $5.52 billion from the previous three months.
In the week ending 29 February India's foreign exchange reserves rose to $301.235 billion, up from $294.61 billion.