It's now time to dig deeper into your pockets.

India's central bank on Friday hiked key rates by 25 basis points in the 12th such exercise since January 2010 to tame stubborn inflation, setting the stage for auto, housing and commercial loans to become dearer once again.

Air travel also could hurt with Jet Airways announcing an increased fuel surcharge on its tickets by Rs 200 with effect from tomorrow.

Aviation Turbine Fuel (ATF) price at Delhi's T3 airport was hiked by Rs 1,429 per kilolitre (kl), or 2.5 per cent, to Rs 57,689 per kl with effect from today.

On loans, opting to address the problem of high inflation over slackening factory output and overall growth, the repurchase rate, or the interest the central bank levies on short-term borrowing by commercial banks, were raised to 8.25 per cent from 8 per cent.

Automatically, the reverse repurchase rate, or interest on short-term lending, gets hiked to 7.25 per cent from 7 per cent, since the central bank felt inflation levels remain well above its comfort zone.

Both these measures keep a check on the money supply in the system by making it more attractive for commercial banks to park their funds with the Reserve Bank in the form of government securities, rather than lending it for commercial purposes.

In a similar exercise last month, the two policy rates were hiked by 50 basis points.

The rate hikes were effected by Reserve Bank of India (RBI) Governor Duvvuri Subbarao during the mid-quarter review of the apex bank's monetary policy for this fiscal here Friday, amid high inflation rate that is nudging double-digit levels once again.

"The monetary tightening effected so far by the Reserve Bank has helped in containing inflation and anchoring inflationary expectations, though both remain at levels beyond the Reserve Bank's comfort zone," said the central bank.

"A premature change in the policy stance could harden inflationary expectations, thereby diluting the impact of past policy actions. It is, therefore, imperative to persist with the current anti-inflationary stance."

Latest data showed annual inflation rate for August, based on the wholesale price index, inching closer towards double digits at 9.78 per cent, while the country's food inflation still remained at elevated levels.

As expected, industry lobbies were peeved with the rate hike.

"Even as RBI justifies this rate hike of dampening inflationary expectations, it is difficult to fathom that this will be achieved when a cumulative rate hike of 325 basis points since March 2010 could not achieve this objective," said Rajiv Kumar, secretary general of Federation of Indian Chambers of Commerce and Industry (FICCI).

Commercial banks are now widely expected to pass on the interest rate burden to their customers that could made consumer and corporate loans dearer, even while raising the interest outgo on existing loans, along with a possible longer tenure for repayment.

The growth of India's gross domestic product (GDP) had decelerated to 7.7 per cent in the first quarter of 2011-12 from 7.8 per cent in the previous quarter and 8.8 percent in the corresponding quarter of the previous year.

Confederation of Indian Industry (CII) President B. Muthuraman said the aggressive monetary tightening measures were 'forcing the economy into a sluggish growth phase'.

"Action needs to be taken by the government to encourage implementation of projects and ease supply side bottlenecks. This will not only step up the growth momentum but also ease inflationary pressure," added Muthuraman.

Reacting to the monetary policy update, Finance Minister Pranab Mukherjee said the hike effected by the central bank was in tune with the stance it has taken in a bid to bring down prices and inflationary expectations.

"We are hopeful that measures taken would take us back to a more comfortable inflation situation earlier rather than later," Mukherjee said, and hoped overall economic growth - which had retarded to 7.7 per cent in the first quarter of this fiscal - would pick up in the second half of this fiscal.

The central bank, however, did not mince words in criticising the government for its fiscal management due mainly to decline in revenue receipts, pressures from unproductive expenditure and high subsidies on fuels and fertilisers.

"Fiscal deficit at 55.4 per cent of the budget estimates in the first four months of the current fiscal was significantly higher than that of 42.5 per cent during the corresponding period last year," the central bank said.

"Going forward, the stance will be influenced by signs of downward movement in inflation trajectory, to which the moderation in demand is expected to contribute, and the implications of global developments."