India’s petrol prices increase by 4.5%

India’s state-run fuel retailers have increased petrol prices by about 4.5 per cent, the second rise in a month, in a move that will add to the pressure on Asia’s third-largest economy as it struggles to fight record high inflation.

Sunday’s move comes on the back of soaring global crude oil prices, highlighting economists’ concerns that the rapid increase in commodity prices. is hitting the broader economy.

Indian Oil Corp, the country’s biggest retailer, is to raise prices by about Rs2.50 (five US cents) a litre, and Bharat Petroleum Corp and Hindustan Petroleum Corp plan increases of Rs2.53 a litre and Rs2.54 respectively. In late December they lifted prices by about 5.5 per cent.

Opposition parties criticised the government for allowing increases when millions of people were struggling to buy basic food products to survive.

The rightwing Hindu nationalist opposition Bharatiya Janata party demanded an immediate rollback of the measure. “This hike is totally unjustified. This is nothing but loot of the common man by the government,” said the BJP’s spokesperson.

Although state-run fuel retailers have been free to set their own prices since June, when India decided to end state control over prices and allow them to move freely with global markets, any increase is still informally approved by central government.

The latest rise will hurt millions of poor Indians who have been struggling to make ends meet in recent months amid spiralling food prices and strengthen expectations that the Reserve Bank will lift lending rates later this month to tame inflation.

“We expect the RBI to hike policy rates by 25 basis points in the January 25 policy meeting and by a cumulative 100 basis points in calendar year 2011,” said Tushar Poddar, chief India economist at Goldman Sachs.

India’s wholesale price index, the country’s main inflation indicator, rose 8.43 per cent year-on-year in December compared with 7.48 per cent in November.

However, the cost of food rose by as much as 18 per cent in the last month of 2010 and there are few signs it will abate in the coming weeks, say economists.

“Over the last four weeks, vegetable prices have spiked up to 70.7 per cent year-on-year as of the week ended January 1,” said Chetan Ahya, economist at Morgan Stanley. “The spike has been extreme in vegetables, including onions, tomatoes, eggplant, cauliflower and cabbage.”