After touching a three-year low in January, wholesale-price inflation rose marginally again to 6.84% in February, driven by costlier food items and petrol. That has put a fresh question mark on hopes that a moderation in inflation will lead to an interest rate cut by the Reserve Bank of India
(RBI) that is due to review its policy on March 19.
Experts, however, say the slight hardening of wholesale price index (WPI)-based inflation, may not dampen chances of a repo rate cut - the rate at which banks borrow from the central bank - since a decision on rate cut would be based on the overall economic situation in which growth is also a critical factor. Hopes may be encouraged by the belief that inflation figures out on Thursday were below expectations.
WPI inflation fell to 6.62% in January 2013. It had stood at 7.56% in February 2012.
In the case of manufactured goods, inflation moderated to 4.51% in February compared to 5.82% a year-ago, making monetary policy easing further easier by the RBI in its mid-quarter review on March 19.
"The decline in manufacturing inflation is the critical number that monetary authorities look at, therefore there is comfort in that direction," said C Rangarajan, chairman, Prime Minister's Economic Advisory Council.
"The deregulation of diesel prices is likely to further exert an upward pressure in the near term, albeit removal of the subsidies continues to be important," said Naina Lal Kidwai, president, industry chamber FICCI.