An employee arranges India
n currency notes at a cash counter inside a bank in Agartala
India's wholesale price index (WPI) inflation has risen to 6.84 percent year-on-year in February, making it difficult for the central bank to cut interest rates to help the country's economic growth.
The February inflation rate compares to 6.62 percent recorded in January and economists' expectations for 6.59 percent.
Meanwhile, seasonally adjusted WPI rose 1.0 percent on month in February.
Prices of manufactured goods, the Reserve Bank of India's (RBI) preferred gauge of core inflation, eased, to 4.5 percent year-on-year in February from 4.8 percent in January. Fuel prices rose sharply, to 10.5 percent in February from 7 percent in January, and food price inflation rate remains in double-digits at 11.4 percent.
Earlier, official data revealed that annual consumer price inflation accelerated to 10.91 percent in February from the previous month when consumer prices rose 10.79 percent.
The latest inflation data comes as the Reserve Bank of India is set to decide on key interest rates on 19 March. The inflation pressures would be a concern for the central bank to cut interest rates to help the emerging economy, which is targeting high growth rates after a slow down.
On 13 March, RBI governor Duvvuri Subbarao said that "stubborn" inflation remains a major obstacle to growth in India.
A majority of economists are expecting the central bank to cut the key rate by 25 basis points to 7.5 percent.
"The uptick in inflation is disappointing. But we continue to expect the RBI to cut the repo by an additional 25 basis points next week (19 March), despite the wide current account deficit and inflation being above the RBI's comfort zone," said Jyoti Narasimhan, economist at IHS Global Insight.
In addition to the March's cut, IHS expects one more 25-basis-point cut by end-December, due to sluggish economic activity.
"Even as WPI remains below 7%, India's economy is not out of the woods yet, far from it," Narasimhan added.
"A few more small RBI rate cuts in 2013 will not resolve the supply bottlenecks or fiscal excesses that are keeping investment at bay. It is still up to the government to tackle these issues and implement additional structural reforms in the near term."
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