Consumer inflation inches up to 10.36

Indian annual consumer price inflation remained unchanged in May at 10.36.

India8217;s consumer price inflation inched up to 10.36 in May from 10.26 a month before on soaring prices of vegetables and edible oil.

The consumer inflation,however,is much higher than the 7.55 rise in wholesale price-based inflation for May. High inflationary pressure forced the central bank to refrain from much-expected slashing of key policy rates to prop up the economy in its mid-quarterly monetary policy review on Monday.

Vegetables led the pack with a price rise of 26.59 in May,while edible oil and fat items gained 18.21,according to the official data released on Monday. Milk and milk products8211;with a combined weight of 7.73 in the CPI basket8211;spiked 13.74 last month from a year before,and egg,fish and meat rose 10.50.

The consumer inflation in fuel and light,which has a 9.49 share in the overall basket,jumped 10.74 in the last month,while clothing,bedding and footwear witnessed a price rise of 11.36.

The surge in retail prices followed by a spike in wholesale inflation last month complicated the task of the Reserve Bank Of India RBI after data showed industrial production rose just 0.1 in April and the countrys gross domestic product expanded 6.5 in 2011-12,the slowest pace in nine years.

Analysts said underlying inflationary pressures despite softening real economic activities have raised fears of stagflation8211;a situation characterised by high inflation,low growth and wide-scale unemployment. Last week,global rating agency Moodys also warned that India was facing stagflation,adding that the RBI couldnt be too aggressive in cutting interest rates to prop up growth at the cost of inflation. Some others say the surge in prices reflects pressure from the weakening rupee and supply-side constraints rather than excess demand.

In April,the RBI cut the main lending rate by an unexpectedly sharp 50 basis points for the first time in around three years to prop up the economic growth,but warned of limited scope to reduce the rates further citing 8220;upside risks8221; to inflation.