Page last updated at 13:37 GMT, Friday, 11 July 2008 14:37 UK

Indian inflation approaches 12%

Indian supermarket
Food prices have risen sharply this year

Wholesale prices in India grew by 11.89% in the year to the end of June, the fastest rate since the measure began in 1995.

Inflation has tripled over the last six months, driven by the soaring cost of food and fuel.

Figures also showed that the output of India's factories grew by its slowest rate in six years.

Industrial output rose 3.8% in May, compared to the same month in 2007, a sharp drop on the April's 6.2% growth.

"The industrial output numbers ... are a reflection of manufacturers anticipating a slowdown in consumer spending as high inflation bites into incomes and some scale-back of fresh production plans," said economist Shuchita Mehta, from Standard Chartered Bank.

The Reserve Bank of India has been increasing interest rates to try and dampen inflation. Last month, it increased its main lending rate twice in two weeks to 8.5%.

But higher interest rates could cause economic growth to slow further, analysts predict.

Economists suggest the economy is unlikely to grow at 8-8.5% this year, as the government has predicted.

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