March 24, 2007	Saturday	Rabi-ul-Awwal 4, 1428

NEW DELHI, March 23: India's inflation rate remained stuck near two-year highs at almost 6.5 per cent, data on Friday showed, keeping pressure on the government to tame prices and fuelling talk of more monetary tightening.

The wholesale price index, India's most closely watched cost-of-living monitor, showed inflation was 6.46 per cent for the week ended March 10, the same level as the previous week and slightly below analysts' forecasts.

But the rate, which was just 3.80 per cent a year ago, was still sharply above the 5.5 per cent ceiling set by the central Reserve Bank of India.Inflation, driven by rising food and manufacturing prices, hit a more than two-year high of 6.73 per cent in early February in Asia's fourth largest economy, which is expected to grow by a scorching nine-plus per cent this fiscal year.

“The inflation figures are pointing toward more tightening. Inflation is not coming down and manufacturing prices are showing an underlying upward trend,” said D.K. Joshi, economist at leading domestic credit rating agency Crisil.

Subduing inflation has become a priority for the ruling national Congress government after a surge in the cost of living was cited by analysts as a key factor in its defeat in two state elections last month.

Prime Minister Manmohan Singh held out hope that inflation would ease, saying crop forecasts were “very encouraging” and calling inflation a “momentary” phenomenon.

The government is seeking to boost farm output to close gaps between supply and demand and announced an inflation-fighting budget which cut import duties on a variety of goods to ease prices.

The latest inflation figures came after the deputy chairman of the Planning Commission, a top economic policy-making body, warned any “extraordinary steps” to contain inflation might prove “counter-productive” to growth.

“Very quick steps may result in damage,” said Montek Singh Ahluwalia, who only a few days earlier had voiced fears about the economy overheating.

India is expected to post growth of 9.2 per cent for this fiscal year to end-March and close to nine per cent expansion for the next year.

“The central bank won't bring the economy to a halt. Once it sees signs of growth slowing, which we expect next year, it will reassess its policy but right now inflation is not moderating,” Joshi said.

The bank has been tightening monetary policy since late 2004 but recently picked up the pace, using a variety of tools such as draining excess cash from the banking system to clamp down on surging credit and liquidity growth.

It reviews monetary policy again on April 24 and has said it will take “all possible monetary actions” to curb prices.—AFP