New Delhi - India's annual rate of inflation rose further to a 40-month high of 7.41 per cent due to higher food and commodities prices, compelling the government to withdraw benefits on primary steel exports to stem inflation, officials said Friday.

The wholesale price-based inflation, which stood at 7 per cent in the previous week, surged to 7.41 per cent for the week ended March 29, the highest since November 2004, data released by the federal Commerce and Industry Ministry showed.

The wholesale price index, covering a larger number of products, is usually published weekly, and is more closely watched than the consumer price index, which is published monthly.

The inflation rate has more than doubled from 3.11 per cent on November 3, last year, mainly on account of rising prices of fruits and vegetables, pulses, cereals, condiments and spices and some manufactured items.

Leaders of the United Progressive Alliance (UPA) government were worried about the "political price" of rising inflation as the country faces general elections next year.

The UPA, which came to power in 2004 on the support of poor and farmers while promising reforms with a "human face," have attributed the inflation to the global rise in food and commodity prices.

Indian Prime Minister Manmohan Singh on Thursday admitted that the high food prices may hurt India's economic growth and its economic reforms process.

"Sharply rising food prices can slow down poverty alleviation, impede economic growth and retard employment generation," he told a conference in Delhi.

Commerce Minister Kamal Nath told local media that the government was withdrawing benefits on primary steel exports and was taking a series of measures to control inflation.

"We cannot incentivize export of goods which are scarce," he told the NDTV network to a question on the government's anti-inflationary steps.

The high inflation may prompt the federal Reserve Bank of India to take tough monetary measures to ease out inflationary pressures in its annual credit policy which is due to be announced at the end of this month.

Meanwhile, the UPA's left-wing partners and the main opposition Bharatiya Janata Party (BJP) have criticized the government for the rising inflation.

The BJP said the high rate of inflation showed the dismal failure of the UPA government.

"The all-time 7.4 per cent inflation reflects the total failure of UPA's economic policies in its four-year long governance," BJP spokesman Rajiv Pratap Rudy said.

"Economic brutalities unleashed by the UPA government headed by an economist Prime Minister have left the common man bleeding," he added. (dpa)