India's inflation figures soar to a 13-year high

By Kartik Goyal  |   2008-6-21  |     NEWSPAPER EDITION

INDIA'S inflation accelerated to a 13-year high and economists forecast higher consumer prices in China after record crude oil prices forced both nations to increase the regulated cost of fuel.

India's wholesale prices jumped 11.05 percent in the week to June 7, the government said yesterday, more than the median 9.79-percent increase in a Bloomberg News survey of 18 economists. China's fuel price increase yesterday may lift consumer prices by 1 percentage point this year, a separate survey showed.

A near doubling of crude oil prices has pushed up subsidy costs and threatened to erode profits of refiners such as Indian Oil Corp, prompting governments from Indonesia to Sri Lanka to raise fuel prices. That's adding pressure on central banks to increase interest rates and cool inflation, risking growth.

"If China and India are going to continue to roll back subsidies, then clearly we have not seen a peak in inflation," said Joseph Tan, a strategist at Fortis Bank SA in Singapore. "They need to tighten monetary policy, which means that growth is going to slow."

China told lenders to set aside more money for a fifth time this year on June 7 to cool inflation that is close to a 12-year high.

Banks must put aside a record 17.5 percent of deposits as reserves from next Wednesday.

In India, the central bank unexpectedly raised interest rates for the first time in 15 months last week, increasing the repurchase rate to a six-year high of 8 percent from 7.75 percent. The move came seven weeks before the bank's scheduled monetary policy meeting on July 29, and after it twice increased its cash reserve ratio in April.

Refiners gain