Inflation December 22 2007

India's inflation held below the central bank target for a sixth straight month as the government continued to keep a cap on fuel prices despite the fact that global crude oil surged to a record. Wholesale prices rose 3.5 percent in the week ended Dec. 22 from a year earlier, faster than the previous week's 3.45 percent gain, the Ministry of Commerce and Industry said today in New Delhi.




The Indian government may raise auto fuel prices by the end of January for the first time in 18 months according to Oil Minister Murli Deora yesterday. That could reignite price pressures and prompt the central bank, which targets 5 percent inflation, to keep its benchmark interest rate at a 5 1/2-year high at its Jan. 31 monetary-policy meeting.

India imports almost three-quarters of its energy needs, and has not allowed increases in fuel prices even as crude oil prices have risen 79 percent from a year ago.

The government caps gasoline and diesel rates to help keep inflation down and protect the poor, who make up half the country's 1.1 billion people. Gasoline and diesel prices were last changed on Feb. 15, when they were cut for the second time in 2 1/2 months. Cooking gas prices haven't been raised since November 2004 and kerosene since April 2002.

Inflation in the third week of December rose as the index of fuels, with 14.2 percent weight in the inflation basket, rose 0.5 percent and the index for manufactured products, including sugar, cement and edible oils, rose 0.1 percent.