October WPI inflation at 1.34 pct y/y - govt

By Rajkumar Ray

NEW DELHI (Reuters) - India's annual wholesale inflation accelerated in October from a month earlier on costlier minerals and fuels, and analysts expect monetary tightening from next year as the economy picks up.

On Saturday, the government switched to using monthly inflation data for all commodities with 1993/94 as the base year, from the earlier practice of announcing weekly price movement.

The wholesale price index was up 1.34 percent in October from a year earlier, compared with 0.5 percent in September and 11.06 percent a year ago.

Food prices however declined by 1 percent from the previous month's level, while minerals and industrial fuels were each costlier by 3 percent.

"Inflation is building up from the supply side with a lower summer crop and rise in global fuel prices. Demand side pressures might start showing up from December," said N.R. Bhanumurthy, economist at National Institute of Public Finance and Policy.

"Going forward, we expect monthly inflation at 7.8 percent by end of March 2010," he said.

At its policy review last month, the Reserve Bank of India (RBI) lifted its inflation forecast to 6.5 percent for the end of 2009/10 fiscal year in March, but left policy rates unchanged.

The RBI also laid the groundwork for a rise in interest rates by tightening credit to the commercial property sector and removed some of the emergency liquidity support steps that were extended to protect the economy from the global downturn.