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New Delhi: India's annual inflation rate topped eight per cent in March for the first time in three-and-a-half years, revised data showed on Friday, and analysts said a looming fuel price rise could push it closer to double digits.
Preliminary data for May 10 showed the wholesale price index rose an annual 7.82 per cent, close to the previous week's annual rise of 7.83 per cent and market forecasts.
But the reading for March 15 was revised sharply upwards to 8.02 per cent from 6.68 per cent, making it the highest inflation rate since September 2004, and fuelling expectations the central bank would take more steps to try to contain prices.
"It just says we are dangerously close to 10 per cent," said Shubhada Rao, chief economist at Yes Bank in Mumbai.
The Reserve Bank of India has not raised interest rates in over a year to avoid slowing the economy too rapidly.
Instead, it has tightened cash conditions to contain surplus inflation-stoking funds in the system, but surging inflation is posing a dilemma.
"Do we live with a high inflation or see growth prospects jeopardised in the short and medium term?" Rao said.
Indian policy makers are debating whether to raise government-set retail fuel prices, which were last raised in February, to stem losses at state-run oil companies which are selling petrol and diesel below market rates.
Although oil is trading above $130 a barrel on world markets, India sets the heavily discounted prices to help fight inflation and protect hundreds of millions of poor from price shocks.
The oil minister said on Friday the government may take a week to decide whether to raise prices.
Outlook
"With a fuel price hike in the offing, inflation is headed up and we may see inflation hit 8.5 per cent by June," said A. Prasanna, economist at ICICI Securities.
"We expect the central bank to take further liquidity tightening measures to control inflation."
The wholesale price index is more closely watched than the consumer price index, which is published monthly, because it covers a higher number of products and is published weekly.
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