06/21/2008, 00.00
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India's inflation highest since 1995

In India, the price index rises by 11.05% after a small hike in fuel prices. For years, India and China have given subsidies for energy and raw materials. Now they can no longer sustain the price, but risk inflationary repercussions. The search for countermeasures.

New Delhi (AsiaNews/Agencies) - Inflation is at 11.05% in India as of the week that concluded on June 7, the highest level since 1995, driven by the rise in fuel prices decided on June 4.  In China, it is feared that the rise in fuel prices and energy costs decided yesterday will push prices higher, especially for transportation.

Last week, the Indian central bank raised interest rates for the first time in 15 months.  Immediate actions are being studied to halt inflation, which is also demolishing the popularity of current prime minister Manmohan Singh, in view of the political elections in 2009.

The two countries have for years been practicing a policy of subsidising prices, but the strong worldwide rise in the price of oil and raw materials is taking an increasing toll on state finances, and is forcing public fuel and energy companies to operate at a loss. Indian Oil, the largest refiner in the country, lost 4.14 billion rupees (about 62 million euros) in the first quarter of 2008.  In China, many small refineries have stopped working, and with the price of coal fixed, miners do not have incentives to raise production.

From New York, Zhou Xiaochuan, governor of the People's Bank of China, confirms that "higher energy prices will send some pressure to the consumer price index, so we may have stronger policies against inflation".

Xu Kulin, deputy head of the department for prices of the national commission for reform and development, expects another percentage point of inflationary growth, but other experts say that the impact on prices cannot be predicted with certainty.  This is in part because in spite of yesterday's rise of about 16%, the price of fuel remains 30-38% below the price on the world market, so further increases are possible. (PB)

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