New Delhi: India’s wholesale prices rose for a fourth week, making it harder for central bank governor D. Subbarao to keep interest rates low and boost economic growth without fanning inflation.

Tough task: Reserve Bank of India governor D. Subbarao. Abhijit Bhatlekar / Mint

“The Reserve Bank of India’s communications are likely to be increasingly hawkish in a bid to manage inflationary expectations," said Sujan Hajra, chief economist at Anand Rathi Financial Services Ltd in Mumbai. “India’s monetary authorities face a quandary."

India’s wholesale prices rose in September after declining for three months, and consumer price inflation is already running above 10%.

Finance minister Pranab Mukherjee said on Wednesday inflation may accelerate to as high as 6% by the end of March, more than the central bank’s 5% estimate. Subbarao said this week India may have to raise interest rates ahead of advanced economies in view of incipient inflationary pressures.

India needs a careful management of trade-offs between supporting growth with lower borrowing costs and curbing inflation, the governor said in Istanbul on 5 October.

Consumer prices paid by farm workers jumped 12.89% in August from a year earlier. Inflation for rural workers was 12.67% and consumer prices paid by industrial workers climbed 11.72%.

With inflation coming higher than expected, rate hikes are coming closer, Pranjul Bhandari and Tushar Poddar, Mumbai- based economists with Goldman Sachs Group Inc., wrote in a report. They expect India’s first rate increases in January and predict the central bank may raise the reverse-repurchase rate by 300 basis points in 2010 to 6.25%.