Food prices are high in India as inflation reaches a ten-month high.

The rate of inflation in India rose to 4.78% during the month of November 2009, up from 1.34% in October – making it the highest level in ten months.

This massive increase in the rate is largely due to skyrocketing food prices coupled with a weak monsoon season, and is set to rise to 6.5% by March 2010 according to the Indian government.

The annual rate of inflation is based on the wholesale price index, and while the index of primary articles rose by 11.8%, that of food items went up by a considerable 16.7%.

The country saw its weakest monsoon since 1972; at 23% below normal levels agricultural input was significantly cut. Reflected in food prices, the cost of potatoes, for example, has soared by 101% during the last year, arhar (pulse) by 64%, urad (bean) by 50% and onions by 32%. Some products, such as minerals, edible oils and leather products have become cheaper however, since March of this year.

As a result, the Reserve Bank of India (RBI) is thought to be in talks to change its monetary policy to tighten money supply, leading to a rise in interest rates.

The RBI could take steps to withdraw liquidity – its annual credit policy is expected next month.

According to Bloomberg News, “The RBI is preparing the ground for rate hikes starting early next year,” said Brian Jackson, Senior Strategist at Royal Bank of Canada in Hong Kong. “Today’s numbers should reinforce the case for such a move.”

Other steps are being taken – India’s Finance Minister Pranab Mukherjee asked for Parliament approval to spend an extra 34.58 billion rupees (£5 million) to subsidise costs of some food items for the poor – 800 million of which are living on less than £1.20 a day.

India is not alone in facing such problems. Elsewhere in Asia, inflation is accelerating as the region emerges from the worst global recession since the 1930s, prompting policy makers to start increasing borrowing costs.

Consumer prices in Pakistan rose 10.51% in November from a year earlier and Sri Lanka’s inflation quickened to a six-month high.