India's inflation at a three-year high, markets down 3 per cent

New Delhi - India's annual rate of inflation soared to a three-year high of 7 per cent as Indian bourses fell by 3 per cent in a reaction to the development on Friday, officials said.

The inflation rate, based on the wholesale price index, shot up to 7 per cent mark for the week ended March 22, data released by the federal Commerce and Industry Ministry showed.

The wholesale price index increased more than the market estimate of 6.62 per cent and the previous week's 6.68 per cent.

The inflation rate has more than doubled from 3.11 per cent on November 3 last year owing to a rising prices of essential items, like vegetables.

Statistics showed that while prices of minerals rose by 38 per cent in a week between March 15 and March 22, vegetables were costlier by 4.9 per cent.

Prices of lentils were higher by 1.4 per cent, edible oils were up 1.6 per cent and cement prices remained unchanged.

Indian stock markets slumped as the news of inflation broke.

The benchmark 30-stock Bombay Stock Exchange recorded a loss of 3.02 per cent as the bourse lost 477.85 points to trade at 15,350 levels. Similarly, the broader
50-stock S&P CNX Nifty of the National Stock Exchange in New Delhi shed 2.66 per cent.

The Indian government was expected to take further fiscal measures to contain the rising prices and boost the domestic supply situation by withdrawing incentives on export of at least 40 items including steel and cement, local media reported.

The federal Reserve Bank of India was also expected to take monetary measures including hiking interest rates to tighten the money supply.

The government has already reduced duties on imports of different varieties of edible oils, banned the export of rice and raised the minimum export price of the country's premium Basmati rice from 650 dollars per ton to 1200 dollars per ton.

But economists expect that these measures will only influence prices by the end of April.

"The reason is the higher prices of edible oils and now the prices of steel are notching inflation rates up. But India is not the only country under inflationary pressure, other countries in the region are also facing rising prices," Suchita Mehta, an economist at the Standard Chartered Bank told the NDTV network.

"The inflation rate in the coming weeks will remain high as the pressures will remain," she added. (dpa)

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