Inflation rose less than expected in March as food and manufacturing price pressures eased, suggesting the Reserve Bank of India to opt for a 25 basis-point rate rise next week rather than a more aggressive move. Wholesale prices rose 9.9% in March from 9.89% in February, the data showed on Thursday.

Opposition parties including the BJP and Left parties have said they would seek a special vote on the budget for the financial year that began on April 1, demanding a rollback in petroleum and fertiliser price hikes. If the government loses the vote, it will have to resign. Though inflation did not surpass the double-digit mark in March as was feared by policymakers and analysts, it is likely to remain elevated at the current level for another two months, Finance Minister Pranab Mukherjee said on Thursday.

?Of course, the apprehension was that it may reach the double-digit figure in March. So it has moderated to some extent but you will have to see that till the month of June, this pressure will continue,? Mukherjee said. Still, the rise was the strongest since October 2008, reflecting a sharp pick up in price pressures this year that prompted the RBI in March to raise interest rates for the first time since the global downturn. It is also above the RBI?s projection of 8.5% for the last fiscal year.

?It is important for them (RBI) to signal concerns for inflation. I do expect some tightening in Tuesday?s monetary policy,? said Suman K Bery, member, PMEAC. ?Core inflation is picking up, industrial production number is strong and capacity utilisation has also picked up. Based on these trends the RBI would hike the repo and reverse repo rate by 25 bps each and they will also hike the CRR by 25 basis points,? said HDFC Bank chief economist Abheek Barua.

Food inflation eases on potato, onion prices

The country food inflation eased a bit mainly because of significant decline in the prices of key agricultural commodities such as potato and onion. Food inflation for the week ended April 3, declined marginally to 17.22% from 17.7% prevailed in the previous week. The fall in the rate of inflation was mainly on account of cheaper potato and onions whose prices decline by 23.71% and 2.5% respectively on annual basis, the Centre said on Thursday. For March, food inflation stood at 16.65% with prices of pulses rising by 31.40% year-on-year, that of milk by 17.64% and petrol by 16.82%.