Inflation in India has soared to its fastest pace in more than three years, raising the prospect of a tighter monetary policy that would jeopardise the country's fading economic renaissance.

The figures, which are deeply embarrassing to the Indian government and were pounced on by opposition politicians today, come as soaring prices of foodstuffs and industrial raw materials remain at historical highs, fanning inflation across Asia.

Indian wholesale prices rose at a 7.4 per cent annual pace in the week to March 29, up from 7 per cent in the previous week and wrong-footing economists' predictions for a flat reading. As recently as the first week of February the gauge stood at just 4 per cent, well below the central bank's 5 per cent comfort threshold.

In China, Indonesia and Pakistan inflation rates are above 8 per cent. Consumer prices in Colombo, the capital of Sri Lanka, have risen about 24 per cent in the past year, according to Bloomberg, the financial data provider.

Oil touched a record $112.21 (£56.9) a barrel this week in New York. Wheat prices have more than doubled in Chicago over the past year, and touched a record high of $13.495 a bushel in late February.

Rice, a staple food across South Asia, has increased in price by more than 40 per cent in some markets since January – one of the factors that prompted the World Bank to warn this week that more than 30 countries face the prospect of food riots.

The Indian government, which must call a general election before next May, is hugely sensitive to the rising costs of basic goods. Even small rises in food hit India's army of poor voters hard.

In an effort to temper price rises it has already cut import duties on edible oils and banned the export of pulses and most types of rice - fiscal measures that are providing a fillip for global market prices.

The government has also leaned heavily on steel manufacturers, pressing them into making "voluntary" press cuts or risk mandatory price caps. Today, it withdrew export incentives for goods including cement.

Economists now expect a further hike in the cash reserve ratio - the proportion of deposits commercial lenders need to place with the central bank - before the end of April.

Tighter monetary policy has already contributed to a deceleration in India's economic growth to an 8.4 per cent annual pace in the three months to December, down from an 18-year high of 9.6 per cent in the year to March 31, 2007.

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