INSTANT VIEW 3 -Indian annual inflation at 7.83 pct on May 3

NEW DELHI, May 16 (Reuters) - India's wholesale price index
<INWPI=ECI> rose 7.83 percent in the 12 months to May 3, higher
than the previous week's annual rise of 7.61 percent,
government data showed on Friday.

The rate was above a median forecast of 7.50 percent in a
Reuters poll of analysts. It was the highest since an annual
reading of 7.93 percent on Nov. 6, 2004.

For a long and short-term graph of WPI and key interest
rate moves, click on:
(http://www.reutersindia.net/Econ%20Indicators.htm)
****************************************************************
* KEY POINTS:
SUB-INDEX (WEIGHTING) May 3 Apr 26 Pct change
PRIMARY ARTICLES (22.025) 239.3 238.6 +0.3
Food articles (15.402) 231.5 230.4 +0.5
Non-food articles (6.138) 227.9 228.2-0.1
Minerals (0.485) 630.2 630.20
FUEL, POWER, LIGHT
AND LUBRICANTS (14.226) 345.4 342.5+0.8
MANUFACTURED PRODUCTS (63.749) 198.9 198.3+0.3
Food Products (11.538) 204.3 202.8 +0.7

- Annual inflation for the week ended March 8 was revised
to 7.78 percent from 5.92 percent.

- The annual inflation rate was 5.74 percent during the
corresponding week of the previous year.

- The wholesale price index stood at 228.6 points in the
week ended May 3.

COMMENTARY:

ANUPAM RASTOGI, PRINCIPAL POLICY ADVISER, IDFC, MUMBAI:

"I think inflation is headed lower from current levels and
in three months we expect inflation to be 50 basis points lower
from current levels after the recent steps taken by the
government and the central bank.

"I don't think policy makers will take further steps to
control inflation as latest economic data are already showing
signs of slowing down."

RUPA REGE NITSURE, CHIEF ECONOMIST, BANK OF BARODA:

"Inflation at this level is really shocking and worrisome
now, despite all the efforts and measures taken by the
government and the Reserve Bank. If it still continues to
remain at these high levels despite the crude oil pass-through
not happening... I think this means that the monetary
tightening will continue to remain aggressive."

"The real risk is the global crude oil prices...I don't
know for how long the government will be able to absorb the
shock and cushion the impact. Sooner or later they will have to
allow the pass-through and so I am not seeing any signs of
inflation abating now."

ANJALI VERMA, ECONOMIST, MF GLOBAL: "It is higher than my
expectation of 7.5 percent and it is surprising because it has
come on a higher base.

"I do not think they would hike the rate any time before
before July. The CRR hike, one part of it is yet to be
effective in May and that will tighten liquidity, and in June
there is the corporate tax outflow from the system and that
would suck out liquidity further."

T.K. BHAUMIK, ECONOMIST AND CHAIRMAN ASSOCIATED CHAMBERS OF
COMMERCE AND INDUSTRY (ASSOCHAM) ECONOMIC AFFAIRS COMMITTEE:

"The inflation rate has almost peaked, at best it may go up
to 8.0 percent and then settle down for a decline in the coming
months.

"The actual decline in the rate may take place around
September. Monetary policy will probably remain where it is now
because neither the government nor the Reserve Bank of India
are likely to take any chances with regard to growth."

SAUGATA BHATTACHARYA, ECONOMIST, AXIS BANK, MUMBAI:
"Although liquidity has dried up in the market, if this carries
on for too long, we might now see a rate hike."

D.K. JOSHI, PRINCIPAL ECONOMIST, CRISIL, MUMBAI:

"I think pressures will persist in coming weeks and will
prevail above 7 percent for the next 3-4 months. It's a
Catch-22 situation as they (central bank) have to manage
slowing growth and rising inflation. It's a tough task."

INDRANIL PAN, CHIEF ECONOMIST AT KOTAK MAHINDRA BANK,
MUMBAI:

"The numbers are above market expectations and slightly
surprising but this is not likely to attract any further
measures from the central bank in the backdrop of weak
industrial production data. The government may make noises
about taking further steps to control inflation but I don't
think they can do much about it."

"Inflation is headed above 8 percent in the coming weeks
and given the revisions to the data in the previous week, the
actual inflation may be much higher than the given numbers."

MARKET REACTION:

The 10-year bond yield <IN082418G=CC> was at 7.88 percent,
two basis points higher than the level ahead of the data
release.

The partially convertible rupee <INR=IN> was at 42.73/74
per dollar, weaker than 42.64/65 beforehand.

LINKS: Ministry of Commerce and Industry Web site at:
www.eaindustry.nic.in.

BACKGROUND:

- Cement firms have agreed to cut prices in some states but
finance minister says there is still scope for further
reduction in cement prices.

- Secondary steel producers have also cut prices.

- India suspended futures trading in four commodities last
week for a period of four months after criticism from
government allies that futures had contributed to rising
inflation.

- India's central bank said last month it was raising the
cash reserve ratio by 25 basis points to 8.25 percent, its
highest level in seven years, to control inflation-stoking cash
in the system. The rise will take effect from May 24.

- The unexpected increase in the CRR, the amount of funds
banks have to keep on deposit with the central bank, followed a
two-stage rise announced earlier in April to 8.0 percent.

- The RBI kept its key lending rate <INREPO=ECI> steady at
7.75 percent and left the reverse repo rate, the rate at which
it absorbs excess cash from banks, unchanged at 6.0 percent.

- It forecast economic growth of 8.0 to 8.5 percent in the
fiscal year that began last month, after an estimated 8.7
percent in 2007/08, and aimed to lower inflation to "around 5.5
percent" this fiscal year but with the goal of getting it close
to 5.0 percent as soon as possible.

- The wholesale price index is more closely watched than
the consumer price index (CPI) because it has a higher number
of products in its basket and is published weekly.
(Additional reporting by V. Ramakrishnan, Anurag Joshi, Saikat
Chatterjee and Swati Bhat in MUMBAI) (Reporting by Rajkumar
Ray; Editing by Charlotte Cooper) ((surojit.gupta@reuters.com;
+91-11-4178-1016; Reuters Messaging:
surojit.gupta.reuters.com@reuters.net))