New Delhi — India was forced to increase fuel prices by 10% overnight yesterday as the rising cost of oil struck an emerging giant of the global economy.

The decision, announced by a cabinet committee chaired by the prime minister, Manmohan Singh, marked a key moment in the world’s adjustment to an era of expensive oil. Like many developing countries, India’s government uses subsidies to fix domestic fuel prices and protect the poorest by keeping them as low as possible.

But world oil prices hovering above $120 a barrel make this policy enormously expensive. Across Asia, governments are being forced to reconsider their subsidies and allow fuel prices to rise. If this takes place on a large scale, it could have a knock-on effect on global food prices, providing another spur to a crisis that has spread hardship across the world.

Fuel subsidies are especially sensitive in India, where Mr. Singh’s coalition government is expected to face a general election next year. State oil companies had been compelled to sell their products at below cost, imposing losses of millions of pounds of day. Had this ruinous situation continued, India might have been unable to import the oil it needs to cover about 75% of domestic demand.