Inflation at 7-yr high, touches 8.75 per cent

New Delhi: There seems to be no respite from rising inflation as it reached a seven-year high touching 8.75 per cent for week ending May 31.

The rise in inflation is mainly attributed to rising prices of food articles and vegetables with analysts saying that the recent fuel price hike will push it past the nine-per cent mark.

Analysts were expecting a figure of around 8.32 per cent up from up from 8.24 per cent in the week ending May 24.

Prices of manufactured products were up 0.7 per cent while prices of primary articles rose by 0.9 per cent.

The rising prices of milk, pulses, spices, fruit and vegetables continued to pose a major challenge before the Manmohan Singh government in an election year even as Finance Ministry in tandem with the Reserve Bank of India pursued tough policy and monetary measures to tame inflation.

The previous high in the United Progressive Alliance (UPA) regime was 8.33 per cent as per the provisional figure in the week ended August 28, 2004.

As part of inflation control measures, the RBI had on Wednesday increased the interest rate on its short-term lending to bank by 0.25 per cent to eight per cent, prompting the banks to consider a rise in lending rates for consumers and industry.

Inflation for the week ended April 5 has also been revised upwards to 7.71 per cent versus 7.14 per cent. The inflation rate has now been above the eight per cent level for the third consecutive week.

The sharp rise in inflation has also forced the government to take flurry of fiscal, administrative, and monetary steps to tame the spiraling prices which include scrapping import duty on key steel inputs like metallurgical coke and zinc, and edible oils, and ban on exports of a host of commodities, curbs on futures trade.

The government also forced steel and cement companies to cut prices.

Inflation: Up, up and away: