March inflation above forecast at 6.89%

India's wholesale price index (WPI) rose a faster-than-expected 6.89% in March from a year earlier, mainly driven by higher food prices, government data showed on Monday.

A CNBC-TV18 poll had estimated that wholesale price inflation rate may slow marginally in March to 6.7% as compared to the 6.95% figure of February.

The inflation for food articles came in at 9.84% versus 6.07% in February. The WPI data for the month of January was revised to 6.89% versus 6.55% earlier.

India's industrial production rose less than expected in February while January numbers were revised sharply downwards indicating the USD 1.6-trillion economy was struggling to gain momentum. 

This has raised the probability that the Reserve Bank of India (RBI) would cut policy rates next week for the first time in three years.

A Prasanna, economist, ICICI Securities says "For the RBI what should really matter is the manufacturing number as policy rates act on the demand side, so we think RBI will cut rates. But they will remain cautious in whole of 2012-13 as broadly we expect headline inflation to be at 7% given high food prices and core inflation at 6%."

India's economic growth slowed to 6.1% in the three months to December. The government has forecast growth in the fiscal year that ended on March 31 to dip below 7% for the first time in three years.

(With input from Reuters)