MUMBAI/NEW DELHI (Reuters) - India's wholesale price inflation hit a 14-month high in November, as food price surged, cementing expectations the Reserve Bank of India (RBI) will raise interest rates for a third consecutive time at its policy review on Wednesday.
Surging inflation led by expensive food has emerged as a major headache both for the government ahead of elections and for the RBI, whose governor, Raghuram Rajan, has raised interest rates by a quarter percentage point in each of his previous two reviews despite a sluggish economy.
The wholesale price index (WPI) climbed 7.52 percent in November, marking its highest rise since September 2012, compared with 7 percent in October, the Commerce and Industry Ministry said on Monday.
A Reuters' poll of economists had predicted annual headline inflation of 7 percent in November.
The data backs market expectations the RBI will raise interest rates by another quarter percentage point on Wednesday after data last week showed consumer prices, also sparked by higher food prices, rose at their fastest annual pace on record in November, 11.24 percent from October's 10.17 percent.
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Rising inflation is also bound to add to pressure on the government, which was drubbed in state elections held over the past month, in part due to surging food prices even as the economy is growing at its slowest in a decade.
"With elevated price level and spill-over probability of higher food and service prices to core inflation, we believe the central bank will stick to its anti-inflationary stance, with one more rate hike," said Shakti Satapathy, a fixed income strategist for AK Capital in Mumbai.
India's benchmark 10-year bond yield rose 3 basis points to 8.94 percent from levels before the data.
A Reuters straw poll on Friday showed eight out of 10 analysts expected the RBI to raise the repo rate by 25 basis points on Wednesday.
Data on Monday showed the food price index shot up 19.93 percent in November from a year earlier, the biggest rise since June 2010.
The fuel price index rose 11.08 percent last month, compared to 10.33 percent in October.
Meanwhile, core wholesale price inflation accelerated to 2.66 percent, roughly in line with 2.6 percent in October.
Any rate hike is bound to be unpopular with businesses and investors in an economy widely expected to be growing below the decade low of 5 percent in the fiscal year ended in March.
Data last week showed industrial production output shrank 1.8 percent year-on-year in October, dampening sentiments after recent gross domestic product data had suggested the economy may have bottomed out.
(Reporting by Rafael Nam in MUMBAI and Rajesh Kumar Singh in NEW DELHI; Additional reporting by Suvashree Dey Choudhury and Mumbai markets team; Editing by Richard Borsuk)