A sharp rise in food prices, vegetables in particular, pushed inflation higher to 0.83 per
cent as of September 19 and analysts expect the rate of price rise to cross 7% by this fiscal end.

Inflation was at 0.37% in the previous week. 

Overall, prices of raw food items climbed 16.32% on annual basis, driven mainly by a 49.44-% rise in vegetable prices.

Staple vegetables such as potato and onion were ruling at Rs18 a kg and Rs12.50 a kg, respectively, in the wholesale markets as of September 30, up from Rs16.88 and Rs10 on September 1, market sources said.

Official data showed potatoes were costlier by 81%, pulses 20% and rice by 17%.

Fuel items like furnace oil too were expensive by 12% and light diesel oil by 2%.

Analysts said that the more than expected rate of price rise could push inflation above 7% by the end of the current fiscal.

Commenting on the price rise, Mukherjee said rising inflation is a matter of concern."I have told earlier also that there is an inflationary potentiality and inflation may go up. Naturally, whenever it goes up, it's a matter of concern but at the same time the type of situation which developed cannot continue," he said.

"We had a number of weeks of negative rate of inflation which cannot continue for long," he added.

According to Yes Bank chief economist Shubhada Rao, "it (inflation) is moving at faster pace than anticipated. At this rate there is a likelihood that it may rise above 7% by March 2010."

However, RBI is likely to maintain a neutral stance in its second quarterly review (October 27) of the credit policy, said Crisil principal economist DK Joshi.

Among manufactured products, country liquor turned costlier by 5%, vitamins by 7%, bottles by 18% and lead ingots by 3%.

Butter, ghee and coconut oil also became dearer by 4%, 2% and one% respectively.

Although inflation continues to remain below 1% for the third week in a row, the 52-week average for the week ended September 19 was at 3.03%.

Inflation for the week ended July 18 has been revised upward to (-)0.54% from (-)1.54% estimated provisionally.