NEW DELHI (Reuters) - Inflation is forecast to have risen to uncomfortable levels for policymakers in October due to stubbornly high food prices, adding to the pressure for further interest rate rises despite slowing economic growth.
Data on Tuesday is forecast to show annual consumer inflation at 9.9 percent in October, up slightly from September, and figures on Friday are expected to show wholesale inflation running at an eight-month high of 6.90 percent, according to Reuters polls of economists.
In a more positive sign, factory output is forecast to have risen 3.5 percent in September from a year earlier, much faster than August's 0.6 percent growth.
High consumer inflation, exemplified by a recent hike in onion prices, is a worry for Prime Minister Manmohan Singh's Congress party as it campaigns for five state elections starting in November, a warm up for national elections due by next May.
And the wholesale price measure is forecast to be above the Reserve Bank of India's perceived 5 percent comfort level for a fifth straight month. The RBI has raised its benchmark lending rate by half a percentage point over the previous two months.
The central bank's next policy review is in mid-December.
"Based on the anticipated growth-inflation dynamics, a further 25 basis point hike in the repo rate in second half of 2013/14 fiscal year can't be ruled out," said Aditi Nayar, an economist at ICRA, the Indian arm of rating agency Moody's.
The government will release the October consumer price index and industrial output around 1200 GMT on Tuesday. The WPI data is due around 0630 GMT on Friday.
SOARING VEGETABLE PRICES
Annual retail food inflation was running at 11.44 percent in September, and analysts say prices of vegetables rose by more than 30 percent in October as supply-chain problems push up prices, despite a good monsoon harvest.
"I expect food inflation to remain elevated and do not believe a good monsoon will have any significant impact on correcting food inflation going ahead," said Anjali Verma an economist at PhillipCapital.
A scheduled monthly increase in diesel prices is also expected to impact consumer inflation.
Some economists fear Asia's third-largest economy is potentially entering a stagflationary-type environment, marked by high inflation but slow growth.
Although an uptick in electricity generation, coal output and exports likely led to a pick-up in industrial output in September, overall economic growth remains subdued.
(Additional reporting by Rahul Karunakar in Bangalore; Editing by Rafael Nam and Richard Borsuk)
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