The wholesale price index for food articles was little changed at 182.6 in the week to April 16, compared with 182.9 the week before, according to data issued Thursday by the Ministry of Commerce and Industry. The year-on-year food inflation rate was also steady at 8.76%, compared with 8.74% in the preceding week.
This was the last key economic data that the market was awaiting for cues on the Reserve Bank of India's rate decision scheduled for Tuesday.
Majority of economists expect the RBI to raise its lending and borrowing rates by a quarter percentage point each, after having raised them eight times since March 2010. However, a sizeable section is of the view that the central bank will have to lift the rates by double that to effectively tackle sticky prices.
Although food prices have been edging downwards lately, price pressures have spread to other commodities, leading to continued pressure on general inflation.
March general inflation had unexpectedly accelerated to 8.98% from 8.31% in February, driven by higher prices of manufactured products and fuel.
Citigroup, in a research note, said rising interest rates, higher crude oil prices and policy uncertainty have far outshadowed the positives in the economy. "However, the dominant concern among both policy makers and investors has been continued stickiness in inflation despite market rates being up [sharply]."
Citigroup expects the RBI to raise policy rates Tuesday and sees slightly higher odds for a 0.25 percentage point increase than a 0.5 percentage point raise due to lingering concerns of a slowdown in growth.
Government bond prices were unchanged following the food inflation data as they threw little surprise.
Traders say the prices suggest the market is factoring in a 0.25 percentage point increase in rates. The benchmark and most-traded 7.80% 2021 bond was last trading at 98.04 rupees ($2.21), flat from Wednesday.
Thursday's data also showed the index for primary articles rose 0.1% to 191.1 in the week to April 16, from 190.9 in the previous week. On a year-on-year basis, prices of primary articles were up 12.08%, accelerating from the 11.96% rise recorded in the week to April 9. The fuel products index rose 0.6% on-week to 160.3 from 159.4. For the latest updates PRESS CTR + D or visit Stock Market news Today
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