Expert views: Inflation accelerates to 6.84 percent in February

MUMBAI (Reuters) - India's wholesale price index (WPI) rose a faster-than-expected 6.84 percent in February, clouding the policy outlook ahead of the RBI meeting next week.

Analysts polled by Reuters had expected wholesale prices, the main inflation gauge, to rise an annual 6.54 percent, slower than an annual rise of 6.62 percent in January.

The reading for December was revised up to 7.31 percent from 7.18 percent, government data also showed on Thursday.

COMMENTARY

ANJALI VERMA, ECONOMIST AT PHILLIPCAPITAL, MUMBAI

"The core inflation at 3.8 percent is comfortable. I expect the RBI to cut rates by 25 basis points in the policy because growth is low at 4.5 percent, fiscal consolidation is ahead of expectations and core inflation is falling substantially."

BACKGROUND

- As inflation pressures remain the biggest concern for the central bank to cut interest rates, the latest data will set the tone for the monetary policy review on March 19.

- A majority of economists expect the Reserve Bank of India to lower the main policy rate by 25 basis points to 7.50 percent on Tuesday, a Reuters poll released this week showed.

- The February annual consumer price inflation accelerated to 10.91 percent despite overall weakness in the economy, reflecting retail price pressures.

- Last week Reserve Bank of India Governor Duvvuri Subbarao rejected the notion that high inflation is the "new normal," noting that many of the supply-driven causes of Indian inflation can be corrected by appropriate policies.

- Although industrial output expanded for the first time in three months in January, there were pockets of weakness that underscored the challenges facing the economy as it struggles to motor on from a sharp slowdown. While production of consumer goods recovered, posting an annual growth of 2.8 percent, capital goods output -- a key investment indicator -- fell an annual 1.8 percent.

(Reporting by Treasury and Markets teams; Editing by Ranjit Gangadharan)