On the flip-side, fuel inflation eased to 11.89% for week ended July 2 from 12.67% in the previous week.

As per data released by the government on Thursday, this rise in food inflation was due to soaring prices of protein-based items, cereals and vegetables. Prices of fruits and milk shoot up 13.54% and 12.39%, respectively, during the week under review.

This may force RBI to raise rates for the 11th time since March 2010 at its monetary policy review on July 26, to combat inflation.

This might affect industrial growth further, which has already been slowing down due to high borrowing cost. But, RBI is left with no choice than go for another round of rate hike to tame inflation.

It revised its monetary policy last on June 16, 2011, and raised repo rate to 7.25% and reverse repo rate to 6.5%.

OneIndia Money