India inflation rises more than expected

By Rajkumar Ray

NEW DELHI (Reuters) - India's annual inflation was higher-than-expected for the second week in a row, led by food and mineral prices, pointing to some stubborn price pressures and suggesting the Reserve Bank may be close to ending its rate cuts.

Analysts said the unexpected increase in inflation would not alter the dovish monetary policy stance of the Reserve Bank, which has cut its repo rate 425 basis points since October to 4.75 percent to shield the economy from the global downturn.

But with some prices still firm and signs that the global economic downturn may be over the worst, further rate cuts may be limited, analysts said.

"This data supports our view that we are very close to the end of the rate cutting cycle and we may see a maximum of 25-30 basis points cuts from present levels as the economy starts to recover in the second half," said Shubhada Rao, chief economist at Yes Bank in Mumbai.

The wholesale price index , India's most widely watched inflation measure, rose 0.57 percent in the 12 months to April 18, more than double the annual rise of 0.26 percent in week-earlier data.

It was also above expectations for a 0.09 percent rise, reflecting a trend in recent weeks of stronger than expected inflation.

"I am actually surprised. The fact that this is significantly higher than market consensus points to higher primary product prices inflation and this is a spilling into the manufacturing sector," said Abheek Barua, chief economist at HDFC Bank.

"For the past three weeks we have been saying this as a one-off shock, but now I am beginning to have a doubt on that view and this is reflective of a deeper and longer-term problem with agriculture."