NEW DELHI, Jun 14: India's inflation jumped more than a half-point in May to 9.06 percent, the government said Tuesday, increasing expectations of another rate hike this week by the central bank.
Higher costs for food, fuel and manufactured items drove the latest inflation, which has been rising for more than a year and in April stood at 8.66 percent, the Commerce Ministry said in a statement.
"Inflation remains a worry" and has become "more generalized and largely commodity led. This is reflected in nonfood manufactured product inflation edging up from 4 percent to 6 percent plus," said economist Rohini Malkani at Citi India.
The Reserve Bank of India has said, however, that inflation would hover around 9 percent for the first half of fiscal 2011, due to high prices for oil and other global commodities, before dropping to around 6 percent.
The bank has raised key policy rates nine times since March 2010 in an effort to tame inflation, and is now expected to go for another rate hike at its midterm monetary policy review Thursday.
The government also amended its March inflation figure to 9.68 percent from the provisional 9.04 percent released earlier.
The bad news on inflation follows a dip in gross domestic product for January-March to 7.8 percent, a five-quarter low for India.
The chairman of the Prime Ministerial Economic Advisory Council said 2011-12 growth would likely be closer to 8.5 percent than the 9 percent projected in the budget.
C. Rangarajan insisted, however, that the economy could still pick up, telling reporters in New Delhi that the "potential to grow at 9 percent exists."
The central bank, meanwhile, has estimated growth will be around only 8 percent, while the government has also warned of possible contraction amid an agricultural slowdown. AP