New Delhi - India's inflation rate shot up to a 13-year-high of 11.05 per cent, government data showed Friday, in a development that put further pressure on the government, which has already run into trouble with its left-wing partners over a nuclear agreement with the United States. The inflation rate, linked to India's wholesale price index, recorded its biggest one-week spike as it jumped to 11.05 per cent in the week ending June 7 from the previous week's 8.75 per cent.
The hike in the prices of petrol, diesel and cooking gas announced by the government on June 4 had pushed the inflation rate into the double digits. Besides fuel prices, increases in food prices, particularly edible oil, and manufactured goods added to the inflationary trend.
The inflation rate was the highest since May 6, 1995, when it stood at 11.11 per cent, but analysts said the figure could touch 12 per cent in the coming weeks.
Minutes after the data was released, India's benchmark Sensex stock index tanked by 350 points, or a loss of 2.5 per cent, falling to 14,690. The broader S&P CNX Nifty of the National Stock Exchange also shed 2.3 per cent.
"Double-digit inflation was expected after the government decided to increase fuel prices," Finance Minister P Chidambaram said. "It is a difficult time. More strong monetary measures are needed."
Leading economists told local TV networks that they expected a tightening of monetary policy, which could lead to an increase in interest rates for cars, homes and consumer financing.
The high inflation rate has added to the worries of the Congress Party-led government, whose survival has been threatened by its left-wing partners, who have warned against going ahead with the India-US nuclear deal.
The United States has promised as part of that agreement to provide India with access to civilian nuclear technology and nuclear fuel in exchange for international safeguards on India's civilian nuclear reactors.
The Communist parties, which have more than 60 members in the 543-member Indian Parliament, provide vital outside support to the ruling United Progressive Alliance (UPA).
A crucial meeting of the UPA and its left-wing allies on the nuclear deal is due next week, and the country could face early general elections, possibly by this winter, if the communists decide to withdraw their support.
The Congress Party is keen to avoid early elections because spiralling inflation could adversely impact its showing at the polls. It has already suffered a string of defeats in key state elections at the hands of the main opposition Bharatiya Janata Party (BJP) over the past few months.
Meanwhile, the BJP as well as the communist parties have criticized the government for its failure to contain inflation and have held statewide strikes over the past few weeks.
BJP leaders have described rising inflation and fuel prices as "economic terror unleashed on the country."
Prime Minister "Manmohan Singh's government has equalled the high inflation rates during the previous Congress regime during 1991 to 1995," BJP leader Kirit Somaiya said.
"The Congress Party has again been responsible for the double-digit inflation after a gap of 13 years," he said.
