New Delhi: India's retail inflation eased for the second straight month in February but remained above the 4 per cent medium-term target of the Reserve Bank of India (RBI), strengthening views it will hold rates steady at its April meeting rather than raise them.
The central bank, which has kept rates steady since a 25-basis-point cut in August, is widely expected to maintain rates at their current level next month.
India's measure of consumer price inflation on an annual basis, the CPI index, eased to 4.44 per cent in February, data released by the Ministry of Statistics showed on Monday.
January saw annual consumer inflation of 5.1 per cent, off the December figure of 5.2 per cent, which was the highest rate in 17 months.
Consumer food prices rose 3.26 per cent in February, compared with 4.70 per cent in January, as prices of pulses fell more than 17 per cent from a year earlier.
Fuel and light inflation stood at 6.8 per cent, compared with 7.58 per cent in January, while housing inflation stood at 8.28 per cent, from 8.33 per cent the previous month.
Prime minister Narendra Modi, who faces a general election next year, is trying to push up economic growth while keeping inflation under control.
The central bank expects retail inflation to pick up to 5.1 per cent to 5.6 per cent in April-September before easing, assuming normal rainfall.
Some economists feel that with annual economic growth climbing to 7.2 per cent in the October-December quarter, the RBI could resort to pre-emptive monetary tightening to cool prices.
"We expect the RBI to allude to possible policy tightening at the next meeting in early April, as the concerns on growth slide," Prakash Sakpal, ING Asia economist in Singapore, said in a note published before Monday's data release.
Analysts said retail inflation could accelerate to 6 per cent by June and may remain at 5 per cent to 6 per cent in the financial year that begins on April 1, leading to pre-emptive monetary tightening.
Several analysts now expect one 25-basis-point hike in July-September.
Separately, India's annual industrial output grew 7.5 per cent in January, data released on Monday showed, compared with 6.7 per cent forecast in a Reuters poll.
The world's seventh largest economy is expected to grow 6.6 per cent in the current fiscal year ending in March. The International Monetary Fund expects growth will pick up to 7.4 per cent in 2018, and 7.8 per cent in 2019.