Loss of fuel subsidies adds to pain in India

Building Brics: Fuel increases and rising food costs are expected to push consumer prices even higher in India.

Fuel increases and rising food costs are expected to push consumer prices even higher in India.

Costlier fuel, sugar and pulses could push wholesale price index inflation to 8.5 per cent by next month, said Sujan Hajra, the chief economist of Anand Rathi Securities.

Despite a drop in the wholesale price index last month, inflation levels were still high at 7.45 per cent.

"While food inflation moderated to an eight-month low of 6.6 per cent, the downwards momentum in food inflation may not be sustainable over the coming months because of lower foodgrain production and revision in minimum support prices," reported Crisil, an analytical company.

"Fuel inflation remained high at 11.7 per cent as the upwards revision in diesel prices in mid-September played out fully in October data,"Crisil added.

India's government in September increased diesel prices by 5 rupees a litre and reduced fuel subsidies.

A weaker rupee has also fed into core inflation, which measures non-food manufacturing inflation.

"Despite slowing GDP growth, we believe that core inflation had risen sharply over the last few months due to a pass-through of higher imported input costs as the rupee depreciated by over 9 per cent from January to June," said analysts at Crisil.