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Dark clouds gather over India's economy

India’s central bank is set to raise interest rates for the 13th consecutive time this week in a bid to tame near double-digit inflation, even as dark clouds gather over Asia’s third largest economy.

The Reserve Bank of India has increased interest rates 12 times since March 2010, the most aggressive tightening pace of any central bank globally and analysts expect policymakers to hike them again at a scheduled meeting Tuesday.

India’s economy has slowed under the brunt of the dozen rate rises which have driven up borrowing costs and dampened demand, while a faltering US recovery and the eurozone debt crisis have cast a further pall.

But prospects of a 13th rate hike by the bank looked sealed as India’s food inflation crossed into double digits. It jumped by more than a percentage point in a week to hit a year on year figure of 10.6% last week driven by soaring vegetable prices. Headline inflation stands at 9.72%.