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New Delhi: The food price inflation eased in early March but fuel inflation continued to rise, adding upward pressure on headline inflation and maintaining the case for the Reserve Bank of India (RBI) to raise rates at its April policy review.
Data released on Thursday showed the food price index rose 16.30 percent in the year to March 6, lower than an annual rise of 17.81 percent in the previous week, continuing a downward trend for the second straight week.
But the monthly wholesale price inflation (WPI) stood at 9.89 percent in February, and the finance minister has said it could cross into double digits in March.
Steepening inflation has seen markets pricing in a 25 to 50 basis point rate hike in April.
Policymakers have said food inflation, which they blame on supply shortages, would moderate as the winter-harvested crop reaches markets.
However, a decision in February to raise motor fuel prices has also stoked inflation. The fuel price index rose 12.68 percent in the year to March 6, up from an annual rise of 11.38 percent in the previous week.
The benchmark 10 year bond was unchanged at 7.92 percent on the news.
Key policymakers have said that headline inflation would moderate over the next two months.
The RBI faces the dilemma of balancing the federal government's need to borrow a record $100 billion in the next fiscal year with taming inflation.
Rising prices have sparked opposition-backed street protests and made the government reluctant to push through reforms such as relaxing fuel price controls, even though the Congress party faces no risk of losing power anytime soon.
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