Inflation surpasses 12% in India

Rising food prices have caused unrest across India.

Inflation has risen above 12% in India despite government efforts to tighten monetary policy.

Annual consumer prices rose by 12.01% in the week ending 26 July, a fresh 13-year high, up from 11.98% the week before - according to official figures.

Successive interest rate rises in recent months have done little to quell inflation, driven higher by escalating food and commodity prices.

Economists warned inflation would rise further before easing next year.

'Apprehension'

Double-digit inflation poses a threat to India's rapid economic progress with government fuel subsidies - designed to cushion people from the impact of rising prices - putting increased pressure on public finances.

Tightening credit in three consecutive quarters have not helped in lowering inflation Amit Mitra, Federation of Indian Chambers of Commerce and Industry

Inflation was below 5% a year ago but many economists believe it will peak at close to 14% later this year.

Three interest rate rises since July - which has pushed borrowing costs up by one and a quarter percentage points - have had little impact.

Critics of government policy say the rate hikes have done nothing to address the source of inflationary pressures and, instead, are threatening companies' growth prospects.

"Tightening credit in three consecutive quarters have not helped in lowering inflation," said Amit Mitra, secretary general of the Federation of Indian Chambers of Commerce and Industry.

"If this kind of strict monetary policy is followed further, we are apprehensive," he added.

Although prices are expected to rise further in the short term, India's central bank believes the slowing global economy and the falling oil price will eventually impact on inflation, bringing it down below 10% next spring.