India inflation nears 4 year high

By Sunil Raman
BBC News

The government has said it will focus on capping price growth

Inflation in India climbed to its highest level in March for almost four years driven by rising metal, food and oil prices, official figures show.

The annual rate of consumer price growth was 7.4% last month, the highest rate since November 2004.

Concerned by rising food prices, India last week announced a ban on exports of non-basmati rice and removed duties on imports of crude edible oils.

On Friday, it banned cement exports and withdrew concessions for steel.

Trade Minister Kamal Nath said inflation control was a priority and more measures would follow.

Poverty measures

Unlike many countries India calculates inflation on factory gate prices or wholesale prices.

Prices paid by consumers in retail shops are higher and the issue of price growth and inflation has become a become sticky political problem with six Indian states going to polls in coming months.

The inflation figures came a day after Prime Minister Manmohan Singh said sharply rising food prices could "slow down poverty alleviation, impede economic growth and retard employment generation".

Officials in the Farm Ministry told the BBC that they expect inflation to come under control by the end of April when the wheat harvest picks up.

A harvest of about 75 million tonnes of wheat has been estimated.

Reports of a good harvest in Australia will further dampen world prices, which have been under pressure after extreme weather conditions damaged crops.

The Farm Ministry said that the government had ample rice stocks, and any increase in prices was a result of rice exporting nations announcing a ban.

There were no plans to provide rice at a lower cost to Sri Lanka or African nations.

Ministry officials said that in an election year the government's popularity could be hit by high prices or the perception that prices had risen.

Growing steadily

Communist parties that support the federal government in parliament have again demanded a ban on futures trading in commodities in an effort to keep a limit on price increases.

Sitaram Yechury of the Communist Party of India said that last year the government had banned futures trading in rice, wheat and pulses because of pressure from their parliamentary group.

That move, he said, had helped to check prices then.

But fears of a major economic slowdown have been belied by new industrial production figures out on Friday. Industrial production grew at 8.6% in February 2008 compared with 11% in February 2007.

The government has also revised the January industrial production figure to 5.8%. For the first 11 months of the last fiscal year, industrial growth was 8.7% compared with 11.2% the previous year.

Manufacturing has shown some growth and there has been a slight decline in consumer goods sector in January.