Inflation likely nudged up to 6.95 pct in August

A man carries a sack filled with maize at a wholesale vegetable market in Ahmedabad August 14, 2012.

BANGALORE (Reuters) - India's rate of inflation probably picked up in August from July's near three-year low as poor summer rains drove up food prices, a Reuters poll showed, giving the RBI even less room to cut policy rates next week to reinvigorate economic growth.

While central banks elsewhere are trying to ease monetary conditions to counter a global slowdown, the Reserve Bank of India (RBI) has consistently flagged high inflation as a key risk for Asia's third largest economy.

Wholesale prices rose 6.95 percent year-on-year in August, slightly higher than July's 6.87 percent, according to a poll of 32 economists.

Forecasts ranged from 6.75 percent to 7.30 percent and economists said there was more pain to come as the effects of the weak monsoon rains feed into other parts of the economy.

"There are a lot of upside risks to inflation going ahead, so the timing of a rate cut would be a very close call," said Upasna Bhardwaj, economist at ING Vysya Bank.

The central bank meets on Sept 17 and analysts polled in a separate Reuters survey said they expect the repo rate to be unchanged at 8 percent for a fifth straight month, despite India's slowing economic growth.

The inflation rate has averaged a little over 7 percent this year and although it remains above the RBI's perceived comfort level of 5 percent, it is lower than the 9.52 percent average through 2010 and 2011.

Food and fuel costs make up over a third of the wholesale price index and analysts said a lag effect from rising global crude oil prices was still to be felt in India.

The central bank has placed the onus on the government to pull the economy out of the rut and remove supply-side bottlenecks to ease inflation.

The economy grew an annual 5.5 percent in the quarter that ended in June, languishing near its slowest pace in three years, driven by a rebound in construction and financial services.

(Reporting by Ruby Cherian; polling by Aakanksha Bhat; Editing by Sanjeev Miglani)