New Delhi, February 11:

Inflation is rearing its head in booming India, sparking warnings that soaring food prices spell misery for the poor and that India’s economy may be overheating.

The wholesale price index, India’s most closely watched cost-of-living indicator, on Friday showed inflation at 6.58 per cent, the highest reading since December 2004 and up from 4.04 per cent a year earlier. The figure, bla-med mainly on the rising cost of staple items such as garlic and len-tils, came a day after India hiked its annual economic growth forecast.

It now foresees a breakneck 9.2 per cent expansion, due in part to a surge in the manufacturing and services sectors, up from a an earlier prediction of around eight

per cent plus.

Inflation “is a very serious issue for the government. I think it’s the single biggest political issue it faces,” said political analyst Mahesh Rangarajan. He added that it may have an impact on the outcome of upcoming state polls. The government faces elections in three northern states this month and polls in April in Uttar Pradesh, India’s most populous state and one considered politically pivotal.

Politicians have grim memories of the Bharatiya Janata Party’s loss of power in state elections in Delhi in 1998, a defeat attributed by many to spiralling prices of onions, which are a key part of Indian diets. The rising cost of food, which the government attributes to such factors as higher tractor fuel costs and increased global food prices, has made the newspaper and television headlines.

“Every week our grocery bill seems to be bigger,” said Sheila Mukherjee, a retired Delhi civil servant. Property and rental costs are also soaring — 50 per cent rent hikes are common. Many factories in the industrial sector are operating at full tilt and are behind on orders.

The Congress-led government - mindful that rising prices can be political dynamite, especially among India’s teeming poor who helped propel it to power in 2004 - insists price stability is its key short-term priority. But in the past 12 months the cost of pulses, a main staple, has risen by 21 per cent, food grains by 9.5 per cent and fruits by 14.5 per cent.

Economists add that inflation measures do not capture the full extent of price rises. “The rate at which inflation is increasing will spell disaster for the economy in the coming days and bring more misery to the people,” said A B Bardhan, the general secretary of the Communist Party of India, which helps prop up the government in parliament.

While incomes are rising for India’s estimated 300 million middle class, fuelling demand for consumer goods from cars to mobile phones, some 25 per cent of India’s 1.1 billion people still live on less than one dollar a day.

Finance Minister P Chidambaram said yesterday that there were no quick fixes to supply side problems and added that India was facing an unusual combination of factors. He cited annual economic growth of over nine per cent, credit expansion of more than 30 per cent

as banks lend aggressively and money supply surging by over 20 per cent. India’s strong expansion in the past few years has stretched its production capacity and dilapidated transport infrastructure.