Costly vegetables, fruits and protein-based items pushed India's food inflation back to double-digits at 10.05%, rekindling the debate about another round of interest rate hike by the Reserve Bank of India (RBI) in its annual monetary policy review in May.
The RBI is manoeuvring between keeping the growth rate intact, and reining in runaway prices.
Last week, the RBI raised key policy rates (repo and reverse repo) by 0.25 percentage points - the eighth time this year - to cool inflation.
A higher repo at 6.75% would raise banks' borrowing costs, which in turn would raise interest rate on final home, auto and corporate loans. A higher reverse repo at 5.75% would give banks incentive to park money with the RBI, reducing liquidity and demand, cooling prices.
The RBI has acknowledged that underlying inflationary pressures have accentuated, even as risks to growth are emerging.