By Jo Johnson in New Delhi
Friday, February 16, 2007
 
Worsening inflation figures yesterday pushed the Indian government to slash fuel prices in its latest effort to curb the political and economic fallout from the fastest rise in prices in more than two years.

“There is no overheating of the economy,” Kamal Nath, commerce minister, said yesterday. The government, which said last week that it expected the economy to expand by 9.2 per cent this year, says the run-up in inflation is temporary.

India's closely watched wholesale price inflation jumped 6.73 per cent in the 12 months to February 3.

Indian authorities are now undertaking a full-frontal assault on inflation. The Reserve Bank of India has tightened monetary policy twice in the last fortnight and has pushed up borrowing costs by 150 basis points in the last three months.