With the increase in the Wholesale Price Index (WPI) by 9.06% and a total inflation by 9.44%, the Reserve Bank of India will be increasing its interest rates so as to bring down the inflation, which may further result in lower growth.

The main reason for the arrival of inflation in the Indian economy is claimed to be the increase in the prices of diesel, petrol, LPG and kerosene, revealed by the Government. The constant increase in the petroleum goods and power, constituted 15% of the WPI, which was marked at a rise by 12.85% from June 2010-11 and had increased by 12.32% in the month of May this year.

The LPG was marked at an increase by 12.17%, diesel rises by 6.58% and petrol increased by 30.61%. The increase in the prices of the manufactured goods constituted 65% of the WPI, with an increase by 7.43%, from June 2010-2011.

The WPI is more closely watched than the consumer price index (CPI) in India as it covers a higher number of products. Various financial experts predict that RBI will increase the rate of interest at least by 25 basis points, by July 26, as a measure to control the continuous increase in the rates of inflation.