India's food inflation picked up for the fourth straight week in early February, heightening worries it was driving headline inflation past official forecasts and increasing the chance of the central bank pushing up rates. Food prices rose 17.97 percent in the 12 months to February 6, after an annual rise of 17.94 percent in the previous week, data released on Thursday showed.
The fuel price index rose an annual 9.89 percent in the same week, down from a rise of 10.4 percent on year the previous week. Rising prices are a huge headache for the Congress-led government, particularly high food prices that may overshadow government efforts to cut spending and the fiscal deficit in a February 26 budget. Climbing food and fuel costs along with a pick up in manufacturing prices are expected to push headline wholesale price inflation (WPI) from 8.56 percent in January to 10 percent by March.
According to some analysts and India's chief statistician Pronab Senator Government bonds showed little reaction to the data given that markets have already priced in a rise in the headline inflation to double digits and a 25 to 50 basis point rise in policy rates in April. At 0747 GMT, yield on the 10-year benchmark bond was at 7.89 percent, unchanged from its Wednesday close.