India inflation rate rises amid weakening currency

image captionA weak currency has added to the problems facing India's policymakers

India's inflation rate rose by more-than-expected in July as a weaker currency brought higher import costs.

India's main gauge of inflation, the Wholesale Price Index, rose 5.79% from a year earlier, up from 4.86% in June.

The Indian rupee has fallen 10% against the US dollar this year.

Policymakers have taken various steps in recent days to try and stem the rupee's decline. Analysts said the latest data may see the central bank unveil further measures.

Last month, the Reserve Bank of India (RBI) on Monday hiked the interest rate at which it lends money to other banks and also put a cap on their daily borrowings.

It also tightened reserve ratio requirements for banks to curb the supply of rupees.

'Risk to growth'

The steps come at a time when India is also seeing a slowdown in its economic growth.

Asia's third-largest economy grew at an annual rate of 5% in the 2012-13 financial year, the slowest pace in 10 years.

There are concerns that its growth rate may slow further amid slackening growth in the manufacturing sector and declining foreign investment in the country,

That has triggered calls for the central bank to ease some of its policies to try to spur a fresh wave of economic growth.

However, the fall in the rupee's value has seen the RBI take some monetary tightening measures instead and analysts said that it was unlikely that the bank would alter its stance in the near term.

"The rupee's fall and high retail inflation have virtually left no room for further monetary easing," said Daniel Martin, Asia economist at Capital Economics.

Rupa Rege Nitsure, chief economist at Bank of Baroda, added that "the central bank's focus will remain on currency and financial markets stability, even if that means a further risk to growth".

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