India concerned about high inflation - finance official

LONDON, May 4 (Reuters) - India's high inflation is a cause for concern and the government is doing its best to manage rising price expectations, Finance Secretary D. Subba Rao said on Sunday.

India's inflation rate hit its highest level in 3-1/2 years in mid-April at 7.57 percent, driven by higher prices of food, metal products and industrial fuels.

Fighting inflation has become a top priority for the government as it heads towards a general election due by May 2009 and a series of important state polls this year.

"We are concerned about high inflation... The government is doing anything possible to manage inflation expectations," Rao told delegates to the annual meeting of the Asian Development Bank, held this year in Spain.

Rising inflation, driven by food and raw materials costs, has topped the agenda of the ADB's annual meeting given its focus on fighting poverty in the Asia Pacific region where six hundred million people live on $1 a day or less.

The Indian government and central bank have rolled out a string of fiscal and monetary policy measures in recent weeks.

In the latest move on Tuesday, the Reserve Bank of India raised the cash reserve ratio by 25 basis points to 8.25 percent, its highest level in seven years.

The reserve ratio is the proportion of cash that banks have to keep with the RBI on deposit. Economists see the central bank concentrating on keeping down the supply of money in circulation, while the government moves to fix supply-side problems.

(Reporting by Natsuko Waki; Editing by Nick Edwards)